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The importance of correctly calculating holiday entitlement

It goes without saying that it is essential for businesses to get employees’ holiday pay allocation right. This is an issue which has been highlighted recently by the Pimlico Plumbers case where a heating engineer who claimed he was owed holiday pay by the company, successfully appealed against a ruling made by the Employment Appeal Tribunal last year that his claim was out of time. 

Legal experts now warn that the ruling could have “huge” implications for organisations that wrongly engage workers as contractors, as well as employers whose staff receive any kind of variable pay. 

The ruling may particularly affect employers whose staff receive any kind of variable pay, such as part-time workers or contractors because they may face the risk of legacy claims for under-payment of holiday pay when employment ends, even if it is some time since the employee last took their holiday. 

With the combination of the Pimlico Plumbers case and the proposed focus of the government’s Single Enforcement Body on holiday pay compliance, employers need to focus on how they calculate holiday pay now, or possibly face huge holiday pay liabilities going back many years. 

The new enforcement body will have a wide remit to investigate and enforce employment rights which will have an impact on key business focus areas, such as pay governance.   

But the massive number of tribunals demonstrates there still seems to be confusion on the subject.

What does the law say?

Essentially, every employee in the UK has a basic entitlement of 5.6 weeks annual leave; that’s 28 days every year for full-time workers and pro rata for part-time employees. The holiday calculator is a useful tool to work out how much leave someone should get. 

A week’s pay is worked out according to the kind of hours someone works and how they’re paid for the hours. This includes full-time, part-time, term-time and casual workers. 

Managing employee leave requests

Managing employee leave requests can be a headache, especially during the holiday seasons like Easter and Christmas and during peak business times. If you get work scheduling wrong, you may find yourself short-staffed, which could ultimately be detrimental to your business. However, if employees think their holiday requests are being treated unfairly, you will end up with unhappy staff who may even leave the company as a result. 

Clear communication is the answer. The rule of thumb is that an employer must give as much notice as the amount of leave requested when refusing a request for time off. For example, if an employee wants a week off and the employer wants to refuse the request (for valid reasons), it must be refused at least a week in advance of the planned leave dates. 

Most significantly, employers can refuse to grant leave to all employees on certain dates, or insist on employees taking leave (eg on bank holidays or, for this year, the four-day Platinum Jubilee weekend in June). 

These exceptions should be outlined in employment contracts or discussed at the office, but the employer must give notice of at least twice as long as the leave they want staff to take. 

If you would like more in-depth guidance on calculating holiday pay, please contact our expert team today.

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