We remind you again that all employees became entitled to a minimum of four weeks annual leave from 1 April 2007.
Most employers and employees will be well aware of the change. But there are some key points employers should note.
No extra week for employees already entitled to four weeks
The Holidays Act 2003 does not provide for an entitlement to an extra week’s leave. Employees who are already entitled to four weeks leave will not generally get an extra week.
There may be some rare exceptions. For example, for an employee with an employment agreement that reads something like ‘You are entitled to the minimum statutory amount of annual leave plus an additional week’s leave’.
Good practice to amend existing employment agreements, but few consequences for those who don’t
If you don’t change all your employees’ employment agreements from three weeks to four weeks leave your employees will still be entitled to the extra week. The entitlement is automatic regardless of what the employment agreement says.
But you should make sure new staff who started from 1 April have employment agreements that refer to four weeks leave.
You should also consider amending existing employees’ agreements because the Holidays Act 2003 requires employers to tell employees what their entitlements are. There are unlikely to be consequences for employers who fail to do this, but it would be good practice.
Entitlement applies from employee’s anniversary date (not necessarily 1 April)
Employers should note that each employee’s entitlement takes effect from their first anniversary date (the anniversary of the date they started in their current job) from 1 April 2007. So some employees might not accrue their extra week’s leave until 31 March 2008!
In practice, many employers give employees leave in advance of their accrued entitlement date. Previously employers usually did this at a rate of one and a quarter days per month. Future advancements would need to be made at a rate of one and two thirds days per month, in order for a full four week entitlement to accumulate by the end of the anniversary year.
Entitlement applies to employee’s actual anniversary date (not an employer’s chosen anniversary date)
Some employers allocate a date as an artificial anniversary date for all their employees for leave purposes. Generally this is done for ease of administration so that all staff have the same artificial anniversary date. But the Holidays Act 2003 does not provide for employers changing employees' anniversary dates.
If you have allocated an artificial anniversary date, this will benefit employees whose actual date falls after your artificial one. This is okay because the legislation allows more generous entitlements than the minimum. But it would be open to any employees whose actual anniversary dates fall before your artificial one to claim for the extra entitlement from their actual anniversary date. There may be legal consequences for employers who fail to properly give employees their holiday entitlements.
Increased holiday pay rate for leave not yet accrued when employment ends
When employees leave they are entitled to holiday pay for annual holidays already actually accrued but not yet taken. The method for calculating this pay remains unchanged.
Employees are also entitled to holiday pay for the period from their last anniversary date (or their start date for employees employed less than 12 months) to their ending date. The rate for this holiday pay used to be 6% of the employee’s gross earnings over that period. From 1 April the rate will increased to 8% of the employees gross earnings over that period.
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.
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