Calculating holiday pay used to be simple, as it was based on an employee’s basic pay. However, there have been a number of decisions, in both the European Courts and National Courts within the UK that have further defined and regulated what ‘holiday pay’ is and how it is calculated.

A key decision from these courts, in their attempt to interpret EU rulings and national legislation, is that an employee’s regular bonus payments, and most ‘regular and certain’ overtime, should all be included when calculating holiday payments. In other words, employers can no longer calculate holiday based on a flat rate.

As an employee, you should check your contract and be aware of what it says, ensuring it is legally valid. For fixed work, whether part-time or full-time, minimum annual holiday is 5.6 times how many days a week you work, to a maximum of 28 days.

When it comes to holiday those working irregular hours will have the calculation based on how much you were paid over the last 52 weeks.

Contracts of employment will usually state that holiday cannot be rolled over from one holiday year to another. There are some exceptions to this such as when an employee has been unable to take annual leave in a specific leave year due to long term sickness, or maternity/adoption leave to name but a few.

Upon termination of employment, an employee will be entitled to be paid for accrued but untaken annual leave. However, it is important to check that the contract of employment does not require an employee to take all annual leave during a notice period or if placed on garden leave.

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