As businesses and employees start planning leave for the summer holidays, it is important for both parties to be aware of what they are entitled to offer/take and how calculations should be made according to the latest updates regarding employment law.

The amount of time off allocated for employee’s holidays is normally set out in an individual’s contract of employment. The statutory minimum is 5.6 weeks (28 days) which includes bank holidays.

However, as Nathan Vidini, partner and head of employment law at Howells Solicitors, which has an office in Newport, explains, the following factors can affect the amount of holiday pay you are entitled to:

Overtime

Overtime should be taken into account when calculating an employee’s holiday pay. There are three types of overtime - guaranteed overtime, non-guaranteed overtime and voluntary overtime.

Guaranteed overtime - This is where an employer is obliged by contract to offer and pay for overtime. In this situation overtime should be included when calculating holiday pay.

Non-guaranteed overtime - non-guaranteed overtime occurs if an employer does not have to offer overtime but when it is offered the employee is obliged to work overtime. If non-guaranteed overtime is worked on a regular basis it should be taken into account when calculating holiday pay.

Voluntary overtime - voluntary overtime is where an employer can offer an employee overtime but there is no contractual agreement and the employee is free to refuse the offer should they so wish. There is no definitive case law to suggest that voluntary overtime should be considered when calculating holiday pay.

Working Patterns

Employers can find it difficult to calculate an employee’s holiday pay when they work under a different working pattern.

Generally, an employee should be paid holiday pay based on a week’s normal remuneration (weekly wage). If an employee works different hours each week, then their holiday pay should be based on the average pay received over the last 12 weeks. For employees who carry out 'shift work', holiday pay is usually calculated by working out the average number of hours worked in the previous 12 weeks at their average hourly rate.

Commission

Commission can make up a substantial amount of an employee’s income and should be taken into account when calculating holiday pay.

Last year, in a landmark case between Lock v British Gas Trading Ltd, it was ruled that commission must be factored into holiday pay but only for four weeks under European Law rather than the full statutory 5.6 weeks as given by British Law. This case has been referred back to the Employment Tribunal to consider how commission should be factored into holiday pay, so at present there is no definitive legal answer regarding how this is to be calculated and how or if claims can be backdated.

Work-related Travel

This covers travel which is made for work purposes which is not part of their usual commute to and from their usual place of work. Where time is spent travelling to and from work as part of the employee’s normal pay, this may need to be considered when calculating holiday pay.

There are some more points worth considering:

When an employee takes unpaid or paid sick leave or maternity leave, their annual leave will continue to accrue. If leave cannot be taken in the current holiday year, then they should be allowed to carry it over until they are able to take it. or Alternatively, the employee may wish to factor their annual leave during a time which they were sick so that they will get paid for their leave at their usual rate.

Any statutory untaken leave (5.6 weeks) must be allowed to be carried over or encouraged to be taken; it cannot be paid off. Anything over the statutory leave may be allowed to be paid in lieu depending on the terms of the contract of employment.

Where an employee’s employment comes to an end – any untaken leave (including the statutory allowance) must be paid to the employee.

If you are unsure about your personal entitlement or how to calculate holiday pay, you should seek the advice of an HR professional or employment law solicitor.