UK: Holiday Pay - Facts And Myths Exposed

Last Updated: 9 November 2016
Article by Emily Plosker

We Brits love our holidays. Maybe it's the unpredictable summer weather, our romantic ideas of the Mediterranean lifestyle (soaking up the rays on a deserted beach, whilst sipping a crisp white wine and overlooking the Azul coloured sea – sorry, I drifted off) or that we just prefer not to be at work. Whatever the reason, according to a recent YouGov poll out of 22 countries worldwide, British workers are the most likely to take all of their paid annual holiday leave. 

Under the "Working Time Regulations 1998" (WTR) every full-time British worker is entitled to a minimum of 5.6 weeks paid holiday. In normal speak, this means 28 days inclusive of bank holidays. But, compared to our European neighbours we actually feature towards the bottom of the table (on a par with Switzerland and Ireland), whilst Spain and Sweden reign high on a whopping 36 days inclusive of bank holidays. Clearly there's room for improvement, although it was not always the case that we were legally entitled to 28 days paid holiday.

Prior to the WTR, workers' rights in respect of paid holidays were pretty bleak. In fact, unless you were a farmer or a child there was zero legislation in place entitling workers to paid holiday. "But this is unbelievable" I hear you cry. Paid holiday used to be a contractual obligation agreed between employers and individuals, so not all employees had this entitlement. The law provided no minimum floor as it does now. There's a myth that's been circulating that we were always entitled to holiday pay.

So what changed? The UK's membership to the EU and the domestic implementation of the EU's Working Time Directive is what, broadly speaking, required all EU member states to adopt legislation permitting workers to a minimum of 4 weeks' paid holiday. After years of negotiations and some reluctance by the then UK government, the WTR was agreed, albeit with some concessions; namely, the ability to opt out of the maximum 48 hour week. So next time you have a pop at the French for adhering to a 35 hour week, just remember that it was the UK government that wanted its people to have the option of being contractually overworked. Opt outs are now the norm across the UK's financial services sector.

Since that time, little has changed in terms of the legislative framework. However, employment lawyers all over the country got excited and businesses groaned when the following decisions were made in relation to holiday pay.

In Williams and Lock it was decided that a worker on holiday is not only entitled to basic salary but also to remuneration which is "intrinsically linked to the performance of the tasks" or relates to the worker's" personal and professional status". This basically means that your holiday pay could (for example) also include contractual commission payments, which can be a significant component of sales and recruitment agents' remuneration. A key reason for reaching this decision is that if commission payments were not included in holiday pay, a worker would be worse off for taking their statutory holiday entitlement when jet setting to Mykonos. I mean, how can one generate commission whilst bobbing on a boat in the Mediterranean, glass of plonk in one hand and hummus and pitta in the other? The Courts said that not including such payments could mean that workers are put off from exercising their right to paid annual leave, which would go against the purpose of the Working Time Directive.

Following on from this decision, in Bear Scotland Ltd and others v Fulton it was decided that "non-guaranteed" overtime (i.e. overtime which a worker is required to work but which the employer is not required to provide) and allowances which are directly linked to work (but are more than just expenses) should also be included when determining the amount of holiday pay received (although only in relation to the minimum 4 week period). But before you all rush off to try and claim any backdated unpaid holiday pay, be aware that the Tribunal is one step ahead of you. In anticipation of its decision and the potential floodgates that could have been opened, the Tribunal put a limit on how far back a worker can claim unpaid holiday – 3 years.

So whilst workers' current holiday entitlement may not be perfect, it is significantly better than it was 19 years ago.

The next question is, what happens in this Brexit age? Given that the WTR derives from the EU, will this now be revoked and new regulations put in place? If so, will it lead to better or worse holiday rights for employees or maybe just the same? It does seem that there would be no legal bar to this right being diluted but it might spark a worker's revolution so it may not be politically astute. We'll have to wait and see in what way 'Brexit means Brexit'.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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