Holiday Pay Entitlement

Holiday Pay Entitlement

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I have a reasonable understanding of PAYE and the statutory rights that come with it. I'm aware that all employees begin accruing holiday entitlement from the day that they commence working for you and can be calculated using the accrual method. But can an employee legally adopt the accrual method ongoing?

For example, an employee has been working for the same company for five years. The holiday year runs from January to December. All employees are entitled to four weeks holiday plus bank holidays. If the employee wishes to take two weeks holiday in January and two weeks in March, is the employee entitled to full pay for these periods? Or can the employer enforce the accrual method meaning only holiday accrued in that time can be used... which would be one week by the end of March.

A client is concerned as they have paid holiday early in the year before, only for the employee to leave and found it almost impossible to reclaim the overpaid holiday. The final pay was very little, which meant it couldn't be reclaimed from that. And taking legal action would've been too costly and time consuming.

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By SJBeale
03rd Dec 2015 16:13

Holiday Pay

The employee is entitled to full pay whenever they take holiday if they work full time and pro rata for part time.  An employee accrues holiday entitlement from day one of employment and may take that when they like with the agreement of the employer.  It would be up to an employer to honour holiday already booked when an employee commences employment.  An employer may be able to lay down rules for holiday in an employment contract and/or employee handbook ie to reserve holiday for specific periods eg Xmas.  There should be a deductions clause in the contract that would allow an employer to claim back when an employee has taken too much holiday if they leave. 

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By rjoconnor81
03rd Dec 2015 16:26

Accrual System

You can use the accrual system during the first year of employment only, but it must be clearly shown in the contract.  

You also can only recoup over paid holiday when someone leaves if it has been previously agreed, e.g. in their contracts.

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By MzEden
03rd Dec 2015 16:56

If it's not in their contract you cannot deduct any holiday pay overpaid as it would be an unlawful deduction from pay.

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By adam.arca
04th Dec 2015 13:15

But why?

Where's the chapter and verse to back up these (admittedly common) assertions? I've looked and haven't found anything comprehensive or citing references.

To use the OP's example, why should an employer have to pay 4 weeks holiday by the end of March when only one week has been accrued (ie earned)?

Would an employer also pay 3 weeks of wages in advance at the start of the month? Very doubtful indeed but surely analogous to the above scenario.

And why shouldn't the accrual method be used after year one? Do all employees instantly become trustworthy then but not before?

And why is a deduction for overpaid holiday pay unlawful unless there is a contractual clause? An overpayment is an overpayment is an overpayment at the end of the day. Furthermore, there are always implied terms to be considered and it is surely implied in any contract that a party cannot benefit from payments to which they were not entitled.

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Replying to Wilson Philips:
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By legerman
04th Dec 2015 14:44

Overpaid holiday pay

adam.arca wrote:

And why is a deduction for overpaid holiday pay unlawful unless there is a contractual clause? An overpayment is an overpayment is an overpayment at the end of the day. Furthermore, there are always implied terms to be considered and it is surely implied in any contract that a party cannot benefit from payments to which they were not entitled.

Some employers will pay holidays in advance of them being accumulated, and is a concession on behalf of the employer.  It isn't an overpayment.

Unless the employer has it written in the contract of employment that he can deduct this from the final pay, should the employee leave, then it can't be deducted. To do so without the permission of the employee is an unauthorised deduction and as such is unlawful.

http://www.icaew.com/en/archive/library/subject-gateways/law/employment-...   

Similar statements on the acas and law donut websites.

 

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By v.knazevs
04th Dec 2015 14:53

Accrual method allowed
The ICAEW link clearly shows that employee must be given a holiday credit only in respect of the months when they actually worked (when the part of the month is counted as a whole).

I see no evidence from the article that employer can`t enforce the accrual method for calculating holiday entitlement.

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RLI
By lionofludesch
04th Dec 2015 17:06

March

I often wonder why so many firms adopt a March holiday year when a year end in October or November would be much more likely to coax employees to "earn" their holidays before they take them.

Not that this would have helped in the instant case of - apparently - a keen skier.

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By lionofludesch
04th Dec 2015 17:24

Bank Holidays

Again, a minor point, but the employee's entitlement from January to March is not one week but seven days of which some may have been taken on bank holidays.

A lot of still seem to want to cling to the bank holidays.  You can make your employees take bank holidays but they form no part in calculating entitlement.

Surely what's needed here is a letter stating, "yeah, we'll pay you for your holidays but only if you agree to repay the money if you leave before you've worked enough to earn them." Employee agrees, everyone's happy.  Employee doesn't agree, he goes on holiday unpaid.

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