Holidays – Frequently Asked Questions

The recent drop in temperature no doubt brings a yearning for some well needed sunshine. With that in mind we’ve summarised some of the more frequently asked questions regarding holiday pay and entitlement.

What Should Holiday Pay Include?

Most companies think of holiday pay as the basic pay however, holiday pay should also include other elements of pay. A number of legal cases have been key in extending the legal definition of holiday pay and as a result, holiday should include overtime pay and commission or bonuses that are intrinsically linked to the performance of the role. This is especially important when it comes to salespeople who sometimes receive a large proportion of their ‘normal pay’ through commission schemes.

You don’t have to include payments that are only paid occasionally, for example, expenses or end of year bonuses based on company overall performance.

What is included as ‘Normal Hours’ when it comes to holiday pay?

Where some employers fall foul, is when considering what is considered normal hours of work and distinguishing between contracted hours and what happens in practice. When calculating holiday pay you should also include overtime; when it is regularly performed, as well as travel time where the employee doesn’t have a fixed place of work.

What is the Holiday Pay Reference Period?

Most employers are now comfortable with calculating holiday pay using a 12-week average. As of 1st April 2020, the reference period will be changed to 52 weeks.

Is rolled-up Holiday Pay legal?

In short – no. Rolled up Holiday Pay is the practice of including holiday pay as an element of an employee’s normal monthly pay and not paying it at the time the holiday is being taken. This practice is no longer allowed, and Employers should review their processes and contracts to make sure that employees receive pay when they are on holiday. Employers should also avoid paying employees instead of them taking holidays.

If an Employee is off work, do they still accrue holiday days?

Yes – Employees who are on long term sick or statutory leave (e.g. Maternity Leave) still accrue holiday pay. Where an employee cannot take holiday due to sickness absence or statutory leave, they are entitled to carry this over into the next holiday year.

Can we have a ‘use it or lose it’ policy?

Whilst it is perfectly acceptable to have a policy that doesn’t allow for employees to carry forward holidays to the next holiday year, employers should encourage staff to take their holiday days and at the very least ensure each employee takes at least 20 days holiday a year (inc. Bank Holidays).

Can we require employees to take holiday or be restricted from taking holidays at certain periods?

If employers have a legitimate business reason, they can ask employees to take holiday at certain times of the year. A good example of this is when a business shuts down over Christmas/New Year. In these scenarios we always encourage employers to give employees as much notice as possible and ensure that this is documented in the Employee Handbook. Employers can also restrict holidays being taken, for example where there is insufficient cover due to other employees being off or in business critical periods. For example, an Accountancy firm may restrict employees taking holidays in the weeks surrounding the start or end of the financial year.

For further information regarding holidays or any other employment issues please contact our HR Team on 01302 341 344.

By Kris Kerins BSc (Hons) PGC (Tech Mgmt)HR Business Partner

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