We’ve seen no end of sun this summer and your employees are all doubtless looking forward to their summer holidays. But what does all this mean for you as a business owner?

As part of the Working Time Regulations 1998, your workers are entitled to a number of types of leave throughout the year. Most importantly, your full-time employees have the right to take 28 days of paid statutory annual leave each year including all bank holidays.

Recent amendments to the regulations have brought leave entitlements in the UK even closer to that of other European countries where holiday allowance is generally more generous.

Did you know that France has a minimum entitlement of 30 days year and that, in Austria, the minimum annual leave given is 38 days including 13 paid public holidays?

How much annual leave must I give my employees?

Your employees are legally entitled to a minimum holiday entitlement of 28 days a year, usually including the eight annual bank and public holidays in the UK. These Bank Holidays are:

• New Year’s Day
• Good Friday
• Easter Monday
• Early May Bank Holiday (the first Monday in May)
• Spring Bank Holiday
• Summer Bank Holiday
• Christmas Day
• Boxing Day

However, if you’re in the retail or hospitality industry, not having staff available on these days means you'd miss some of the busiest and most lucrative seasons in the year. This means annual leave on public holidays is simply not a viable option for your business.

In these cases, your employment contracts would still entitle your employees to 28 days of leave per year but just not on public holidays.

You can increase your workers’ statutory annual leave entitlement whenever you want using a contractual arrangements such as allowing staff carry over any unused holiday into the next leave year.

What if I have part-time staff?

If you have part-time employees, they are entitled to less paid holiday than their full-time counterparts. Whilst they’re still entitled to at least 5.6 weeks of paid holiday, their working week is shorter meaning they have fewer paid days leave to take.

Let’s say that your employee works for four hours, three days a week. You would then simply multiply these three days by their statutory holiday entitlement of 5.6; coming to 16.8 days of paid annual leave a year.

How much do I need to pay for annual leave?

This holiday entitlement is for paid leave. Your employees may still be able to request unpaid leave outside of their designated 28 days but you are under no obligation to accept this.

For employees with normal working hours, a week’s holiday pay will be the same as what they earn for their basic contracted working week. Any bonuses or allowances they usually receive in this time should also be included.

In the past, commission was not calculated into holiday pay. However, back in 2016, the European Court of Justice ruled that when commission is directly related to the number of sales made at work, they should be included in the calculation of holiday pay.

The employment regulations also state that you can no longer replace statutory annual leave with payment in lieu (unless this is on termination of employment). This means that, when an employee stops working for you, you would need to pay them for any untaken leave for that year.

When can my employees take their holidays?

Your staff should be allowed to choose when they take their leave throughout the years within the conditions that you set.

For example, you may only allow a certain number of workers to take their leave at the same time. You may also wish to set restrictions on how many days off an employee can take at a time, preventing them from claiming an entire month as annual leave.

These procedures are very common and you are well within your rights as an employer to set boundaries around holiday leave. You’ll want to make all of your employees aware of the notification period for requesting annual leave, such as putting in a request two weeks before the desired holiday date.

Panthera tip: If your employee falls ill during their prearranged statutory holiday, this will count as sick leave. They can then take the days of holiday they missed at a later date.

How is annual leave accrued?

Workers build up their annual leave entitlement on a pro rata basis throughout their first year of employment.

Essentially, what this means is holidays are calculated based on the actual days your employee works, rather than a set contractual number. So, for every month the employee works, they earn a 12^th of their total holiday entitlement.

During an employee's nine months of employment, for example, they will accrued 9/12ths of their annual leave. For a full time employee, this would be the equivalent of 21 days’ holiday.

Furthermore, your employees continue to accrue statutory annual leave during their Ordinary Maternity Leave and Additional Maternity Leave.

Let us help

If you want to know more about your obligations as an employer and how to correctly pay staff who are taking holidays, speak to the Panthera team today. Call us on 01235 768 561 or drop us an email to enquiries@pantheraaccounting.com – we’ll be back in touch with you shortly.