Legal Advice · 24 March 2021

Paid holidays by law: a guide

Paid holidays by law: a guide

Employees and people with worker status have access to statutory rights such as holiday pay, maximum working hours and the National Living Wage. Let us look at the legally permitted holidays as they are a critical part of re-energising yourself (or your team) and maintaining productivity and personnel engagement.

What holidays are mandatory paid holidays?

Annual leave

All of your employees are legally entitled to a minimum of 5.6 weeks of paid annual leave. This quantity of days can include bank holidays. This totals out to a full 28 days for a full-time employee. This right to annual leave begins on day 1 of employment.

Your part-time employees are also entitled to a portion of annual leave which is related back to the quantity of days they have worked. It is to be calculated on a pro-rata basis.

  • Five-day a week employees are due a minimum 28 days’ paid annual leave.
  • Four-day week = 22.4 days’ paid annual leave.
  • Three-day week = 16.8 days’ paid annual leave.
  • Two-day week = 11.2 days’ paid annual leave.
  • One-day week = 5.6 days’ paid annual leave.
The statutory holiday entitlement is capped at 28 days. A six-day week therefore also gets a minimum of 28 days’ paid annual leave.

Do not round up partial days of holiday to the nearest half or full day.

The amount of leave that can be taken builds up monthly in advance.

Employers must ensure employees take their annual leave. There is no obligation for a company to pay wages in lieu of unused holidays unless the contract is ending.

Employees on a contract that only pays for the hours worked are also entitled to holidays calculated on a pro rata basis. It is calculated as a percentage of hours worked.

The calculation used is as follows:

  • 52 weeks less 5.6 weeks (holiday) is 46.4 weeks (working weeks)
  • 5.6 weeks divided by 46.4 weeks is 12.07%.
  • For every hour worked, the employee accrues 12.07% of an hour’s holiday and 8 hours worked equals 1 hour’s holiday.

Annual leave in relation to long term sick leave

This is a tricky area and much litigated. Employees on sick leave do still continue to accrue annual leave. If your employee falls sick before OR during annual leave they are entitled to cancel that leave and postpone it to a future date while activating their sick leave.

Employees still sick at the end of a leave year can carry over remaining annual leave into the following leave year. Case law suggests that limiting carry-over to 15 months past the end of the leave year in question. Contractual documentation should be drawn up to expressly state that or it cannot be enforced.

Employees can choose to use annual leave as sick leave but an employer may not force sick employees to use annual leave as sick leave.

This subject matter is complex and legal advice should always be obtained for annual leave and sickness absence discussions.

Annual leave during maternity leave

Female employees on their maternity leave may accrue contractual and statutory holiday. Before the commencement of maternity leave an employer can encourage, or give notice to, an employee regarding using leave entitlements prior maternity leave.

A premature birth ends annual leave and maternity leave begins. Carefully record this as your employee is still entitled to their full annual leave on return.

Annual leave from the previous leave year, including bank holidays, is automatically carried over if an employee is on maternity leave. An employer cannot pay in lieu of this.

Are paid holidays mandatory by law?

Paid holidays for your employees are mandatory. There is case law which has determined that if you have wrongly categorised a person as being self-employed, when in reality they are a worker/employee (even if mutually agreed), then they are employees. They will be entitled to holiday pay for the entire period of their engagement with your business as a worker/employee.  In these circumstances carry-over will be unlimited and, therefore, you have opened yourself up to a big claim as that person has no legal limit as to how far back they can claim for!

Rolled-up holiday pay

This phrase refers to the arrangement where an employee’s hourly rate of pay is ‘rolled-up’ to include an element referable to holiday pay. This concept was done by employers in order to avoid additional pay when the employee actually takes annual leave.