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22nd July 2015

The rising cost of holidays!

The rising cost of holidays

The summer holidays are now under way, but are you up to date with what your obligations are as an employer in relation to annual leave entitlement and holiday pay?

There has been a significant rise in the amount of cases which have been through the courts over the last couple of years, which have set out some important obligations relating to annual leave.

Below are the key points an employer needs to remember about holidays and sickness:

  • Employees do accrue statutory leave whilst on long term sick. This is limited to the 28 days minimum entitlement under UK law
  • Employees should be allowed to “carry over” any statutory leave which they have been unable to use during the holiday year due to long term absence, maternity leave or adoption leave. This is however limited to the 20 days minimum leave under EU law
  • An employee does not have to prove that they were unable to take annual leave while off sick, to be entitled to carry holidays over
  • Holiday leave cannot be carried over indefinitely (i.e. for four consecutive years for those on long term sick). Case law has implied a limit, such that any carried over leave must be used within 18 months of the end of the leave year in which it accrued
  • An employee can elect to take holiday leave while on long term sick leave. We would encourage all employers to encourage staff to use their holidays if on long term sick
  • An employee who falls sick while on holiday is entitled to elect to treat that absence as sick leave and request holiday dates at a later date. This is subject to the employee reporting sickness where possible or providing evidence of sickness in the form of a medical certificate

In addition to the above, there have been a couple of major decisions on how holiday pay should be calculated.

In short, employers used to calculate holiday pay based on basic pa alone, excluding commission, over time etc. Recent decisions have made it quite clear that an employee’s holiday pay should be equivalent to “normal pay”. This means that if the employee typically receives commission payments, shift or travel allowances or works regular over time, then holiday pay should be calculated to include these sums based on the average earnings during the 12 weeks before the holiday is taken.

In short, employers need to review how they calculate holiday pay to ensure it falls in line with the recent decisions that have gone through and be aware of the interaction between holiday leave and sick leave.

Oliver McCann, Employment Partner, Napthens LLP – QCS Expert Employment Law Contributor

Topics: Human Resources

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