Here, Kate Palmer, assistant head of advisory at leading HR consultancy Peninsula, guides small business owners through the fine detail of holiday time regulation for new workers.
Ensuring staff have the correct right to annual leave and that they are taking this to relax and recharge their batteries is essential for businesses that rely on employee engagement and productivity.
There is an amount of holiday leave set in law and failing to provide staff with holiday could constitute a breach of working time rules.
But under Working Time Regulations, all workers are legally entitled to 5.6 working weeks of paid annual leave each leave year. For full time workers working five days a week this calculates as 28 days paid holiday to be taken in the leave year.
Part-time workers have the right to not be treated unfairly because they work part time so they receive the same entitlement, 5.6 working weeks, but this is calculated on a proportional basis depending on the number of days they actually work.
For example, a part-time worker who works two and a half days every week would receive 14 days’ holiday. Employers can choose to give more holiday time through a contractual holiday scheme.
All staff must receive the legal entitlement, even new starters. New members of staff who have joined the business part way through the normal leave year, for example they start in July and the holiday time year runs from January – December, will receive a proportion of the holiday time entitlement based on how long is left in the leave year. An uncertain area for employers is what happens when the employee starts, takes holiday and then leaves?
Employers can protect themselves against this by running a holiday time accrual system during the first year of employment. This system means that statutory holiday entitlement builds up monthly at a rate of one twelfth of the legal entitlement so, when an employee wishes to take leave in the first year, they can only take as much as they have accrued at this date. This stops them overtaking their holiday entitlement and then owing the company holiday time if they leave.
An issue that usually concerns employers is whether they have to give holiday time for bank holidays. There is no legal right for employees to receive time off for bank holidays so long as they are receiving their legal minimum amount. Any right to time off depends on company policy.
Indeed, a decision as to whether bank holidays are included in statutory holiday entitlement, or given in addition, is up to the business. Any provisions for bank holidays need to be included in their contract of employment.
Giving staff their legal holiday leave within each leave year is generally straightforward, but there are special circumstances surrounding carrying leave over which can muddy the waters. Workers must take at least four weeks of their statutory leave each year.
The remaining 1.6 weeks can be carried to the next leave year if the employer agrees to this but they do not have an automatic right to carry the holiday time over.
Consent to carry over will also be necessary if there is contractual leave granted in addition to the statutory leave. However, consent is not necessary where the worker cannot take their leave in the right leave year because they are absent from work for a different reason, for example if they are on maternity or sick leave.
Tribunal cases have determined that, in these circumstances, employers must allow workers to carry over some of their holiday entitlement to the next leave year, though the actual amount differs depending on the reason why the worker cannot take holiday.
Importantly for smaller business owners, when workers are able to take leave can be controlled to ensure business needs and demands are met.
For example, employers can restrict annual leave over the Christmas period or set other periods where leave must be taken. Any restriction in place over holiday leave should be contained in an employee’s contractual terms, though restrictions can be implied if it has become custom and practice.
Kate Palmer is assistant head of advisory at Peninsula
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