Where an employee is employed on two or more successive fixed-term contracts of employment, can payment in lieu of accrued holiday be made at the end of one fixed-term contract, or must it be carried forward to the next fixed-term contract?

Where an employee is employed on two or more successive fixed-term contracts of employment, can payment in lieu of accrued holiday be made at the end of one fixed-term contract, or must it be carried forward to the next fixed-term contract?

Under the Working Time Regulations 1998 (WTR 1998), SI 1998/1833, a worker is entitled:

• to 5.6 weeks’ annual leave or holiday (WTR 1998, SI 1998/1833, regs 1313A), and

• to be paid for that holiday (WTR 1998, SI 1998/1833, reg 16)

For further information:

• on the right to holiday, see Practice Note: Holiday, and

• on the right to holiday pay, see Practice Note: Holiday pay

The right to annual leave may not be replaced by a payment in lieu ‘except where the worker’s employment is terminated’ (WTR 1998, SI 1998/1833, regs 13(9)(b)13A(6)(a)).

‘Employment’ for these purposes means employment under the worker’s contract (WTR 1998, SI 1998/1833, reg 2(1)).

The WTR 1998 do not specifically state which provisions should be used to determine when a worker’s employment is terminated for the purposes of WTR 1998, SI 1998/1833, regs 13(9)(b)13A(6)(a), and we are not aware of any case law on this issue.

Certain provisions of the Employment Rights Act 1996 (ERA 1996) are applied under the WTR 1998, SI 1998/1833, for specific purposes, eg for the purposes of determining a week’s pay under WTR 1998, SI 1998/1833, reg 16. However, other provisions of ERA 1996 are not applied more generally under WTR 1998, SI 1998/1833.

Under WTR 1998, SI 1998/1833, reg 13(9), the basic four weeks' annual leave must be taken in the leave year in respect of which it is due and may not be carried over from one leave year to the next, ie the worker is to ‘use it or lose it’. This is subject to certain exceptions established from case law, and a further exception in respect of the coronavirus (COVID-19) pandemic.

For further information, see:

• the section of Practice Note: Holiday entitled Statutory holiday accrual, under the heading ‘Carry forward of leave’

• the section of Practice Note: Coronavirus (COVID-19)—holiday and holiday pay entitled Carrying forward holiday entitlement

In practice, where (for whatever reason) the employee has not taken their accrued holiday entitlement during the term of a fixed-term contract, the employer may opt to require the employee (using the notice provisions in WTR 1998, SI 1998/1833, reg 15) to take that accrued holiday entitlement prior to the end of that fixed term, if that is practicable, as it avoids any issue arising in relation to accrued holiday.

For further information, see the section of Practice Note: Holiday entitled When statutory holiday may be taken and the notice requirements.

For information:

• on determining the effective date of termination for unfair dismissal purposes under ERA 1996, see Practice Note: Effective date of termination

• on determining continuity of employment for the purposes of certain statutory rights under ERA 1996, see Practice Note: Continuity of employment

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