Hiring your first employee(s) is an exciting part of business growth, but it can be a daunting task, especially when it comes to getting to grips with the various laws concerning employment.
Holiday leave, or annual leave as it is often referred to, is arguably one of the most valuable rights to an employee, so it’s imperative that you understand their legal entitlement and ensure that you are correctly allocating holidays and pay.
In this post, we’ll take a look at whether you have to provide holiday pay to all company employees, and explore the legalities you should be aware of as an employer, to ensure compliance and a positive workplace culture. Let’s get started.
Who is entitled to holiday pay?
Anybody you employ who is classed as a ‘worker’ is legally entitled to 5.6 weeks (equivalent to 28 days) of paid holiday each year – known as statutory leave entitlement.
This entitlement is inclusive of agency workers, workers with irregular hours, and workers on zero-hour contracts.
Part-time employees
Part-time employees are entitled to a pro-rata amount of paid holiday based on their working hours.
This means that although they have equal entitlement, their annual leave will amount to fewer than 28 days. For example, if they work 3 days a week, they must get at least 16.8 days’ leave a year (3 × 5.6).
Irregular hours
For those working irregular patterns, such as shift workers or term-time staff, holiday pay is given for each hour they work. This can be calculated using GOV.UK’s holiday entitlement calculator.
Are there any limits on statutory leave?
While full-time employees are entitled to a minimum of 5.6 weeks of annual leave, this entitlement is capped at 28 days. This means that even if an employee works more than their full-time hours i.e. 6 days a week, they are still only entitled to 28 days paid holiday.
As an employer, you can choose to offer more leave than the legal minimum.
This additional leave does not need to apply the same rules as the standard statutory leave. For example, you may choose to specify a certain timeframe before an employee becomes entitled to extra leave, such as an additional 3 days’ holiday each year after three years of service has been completed.
Are bank holidays a legal entitlement?
There is no legal requirement for employers to give bank holidays as paid leave. The decision to grant bank holidays as paid time off is at the employer’s discretion, and depends on the terms you have outlined in the company’s employment contract or agreement.
Your decision on whether or not to include bank holidays as part of an employee’s statutory annual leave will ultimately come down to how your business operates and if you are trading on that day. It is important that whatever you decide, you make it clear to employees from their first day of employment.
The only exception to this is if you operate a shop that’s larger than 280 square metres, in which case you cannot open on Christmas Day, due to the Christmas Day (Trading) Act 2004.
How to calculate leave entitlement
Leave entitlement starts to build up – or ‘accrue’ – from the first day an employee starts working for your company.
To calculate how much paid leave your staff should get; you can use either a ‘leave year’ or an ‘accrual’ system.
Leave year
A leave year refers to the period during which an employee accrues and takes their annual leave entitlement. For example, it might run from 1 January to 31 December, or you may use a rolling system that starts on the employee’s anniversary date or another pre-determined date.
Whatever this period is, you should inform employees of these dates as soon as they start.
Accrual system
An accrual system, on the other hand, involves working out an employee’s leave during the first year of their job. Under this system, an employee will get one-twelfth of their leave each month.
Again, through accrual, employees begin earning paid holiday from their first day on the job.
Can employees carry over unused holidays?
While there is no automatic right for employees to carry over leave that has not been used in the allocated leave period, there are some exceptions in which workers are legally entitled to carry unused holiday forward into the next leave year.
These include the following circumstances:
- Where the worker is prevented from taking their leave entitlement due to a period of statutory leave (such as maternity or paternity leave)
- Where the worker is prevented from taking their leave entitlement due to long-term sickness absence
- Where the worker did not have an opportunity to take their leave (for example, due to busy spells or workload commitments)
To prevent holidays from accumulating into the next leave period, it’s good practice for employers to ensure that staff are encouraged to take their leave each year, and make efforts to promote a positive work-life balance where workloads do not frequently prevent holidays from being taken.
If it is not company policy to carry over unused leave by choice, then you should ensure all employees are made aware of this.
Final thoughts
For employees, holidays are a welcome break, providing an important opportunity to recharge and spend quality time with family and friends.
As an employer, it’s crucial to ensure that all employees have been fairly allocated paid time off, to not only maintain a positive workplace culture, but to ensure vital compliance with UK employment law.
We hope you’ve found this post informative and that it’s helped clarify the rules around paid holidays. If you have any questions, please leave a comment below and we’ll come back to you.
