It's the summer season! Whether employees are off to Sri Lanka, Scotland, or settling in for a staycation, Irish employers must ensure that their employees take their annual leave. In this insight article, we have outlined key points for employers to bear in mind this holiday season.
Who is eligible for annual leave in Ireland?
Under Section 19 of the Organisation of Working Time Act 1997 (the "1997 Act") all full-time, part-time and fixed-term employees are entitled to annual leave. Employers must provide details of an employee's annual leave entitlement in their employment contract.
How much annual leave are employees entitled to?
Annual leave accrues on the basis of the hours and days worked by an employee. The 1997 Act sets out three ways that the entitlement to annual leave may be calculated:
- An employee working 1,365 hours is entitled to four working weeks in a leave year
- An employee working at least 117 hours is entitled to one-third of a working week for each month in the leave year
- An employee is entitled to at least 8% of the hours that they work in a leave year which is subject to a maximum of four working weeks
The 8% method is normally used for calculating the annual leave entitlements of part-time or casual employees. The 1997 Act states that:"references to a working week shall be construed as references to the number of days that the employee concerned usually works in a week".A 'working week' is therefore dependent on the employee in question. An employer is obliged to look at an employee's pattern of work and calculate the employee's average working week.
How do I calculate an employee's pay during annual leave?
The Organisation of Working Time (Determination of Pay for Holidays) Regulations, 1997 (the "Regulations") state that an employee's annual leave pay should be based on their basic salary plus any regular and consistent allowances or bonuses. The Regulations state that overtime should be excluded from this calculation.
Recent case law, such asCarlow County Council v Eamon Ryan DWT2312indicates a shift in interpretation as to whether overtime should be excluded from annual leave pay calculations. The Labour Court in this case referred to the Court of Justice of the European Union (CJEU) case ofTorsten Hein v Albert Halzhamm GmbH & Co.KG (Case C-385/17),where the CJEU distinguished between exceptional, unforeseeable overtime (excluded from annual leave pay calculations) and regular, predictable overtime which should be included, if it comprises a significant portion of pay. The Labour Court in this case found that Mr Ryan's overtime was regular, predictable and represented 22% of his total pay. As a result, it was held that overtime should be included in his annual leave pay calculation. Employers should therefore consider whether an employee's overtime is regular and predictable when calculating annual leave payments.
Can annual leave be carried over into the following year?
Annual leave should be taken within the leave year stipulated by the employer. It is at the employer's discretion to allow an employee to carry over their annual leave entitlement for a period of six months into the next leave year. This provision does not entitle an employee to request or insist that their annual leave is carried over but rather is intended to address a situation where an employer cannot facilitate an employee taking annual leave in a particular way due to business requirements.
Employers may allow, within its annual leave policy, employees to carry over a certain number of days annual leave within the following leave year. Alternatively, employers may operate a "use it or lose it" policy, whereby employees forfeit their annual leave balance if not used by the end of the leave year.
Can an employee claim back annual leave if they are ill during their time off?
Bearing in mind the reasons for taking annual leave (rest and recreation) and the separate purpose for taking sick leave, employers should not require employees on sick leave to use their annual leave entitlement. If an employee becomes ill during their annual leave and provides a medical certificate, these days will not be regarded as annual leave.
If an employee is on long-term sick leave and cannot take their annual leave due to illness, annual leave can be carried over for a period of 15 months after the leave year in question.
Key takeaways for employers
If an employer does not comply with the 1997 Act as it relates to annual leave entitlements, an employee can take a claim to the Workplace Relations Commission (the "WRC") within six months of the date of the alleged breach. If the complaint is well-founded, theWRCmay require the employer to comply with the provisions that they have breached and may also require them to pay the employee compensation not exceeding two years pay.
Employers should consider whether their annual leave procedure is fit for purpose. An annual leave policy and/or the employee's contract of employment should clearly outline an employee's entitlement to paid annual leave, the relevant "leave year" period for the relevant employer and details its approach to carry over of accrued but untaken annual leave. Any "use it or lose it" policy should be specifically highlighted.
Employers should also consider keeping track of employees who are not using their annual leave and issuing reminders where appropriate. It may also be necessary to meet with individual employees who have accrued high levels of accrued but untaken annual leave days.
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.
