Holiday pay

By Tolley in association with Sarah Bradford

The following Employment Tax guidance note by Tolley in association with Sarah Bradford provides comprehensive and up to date tax information covering:

  • Holiday pay
  • Statutory holiday pay
  • Contractual holiday pay
  • Contractual and statutory holiday pay

The right to be paid for holidays is a statutory entitlement and there may also be a further contractual entitlement. Almost all workers are entitled to 5.6 weeks paid holiday per year (which can include bank holidays). Self-employed workers have no statutory leave entitlement.

Statutory holiday pay

The Working Time Regulations 1998 entitle a worker to be paid:

  • during his statutory holiday, entitlement of 5.6 weeks a year
  • in lieu of any statutory holiday entitlement accrued but unused on termination of his employment

This does not prevent an employer offering a more generous annual paid leave entitlement as part of a contract of employment.

Calculating statutory holiday pay

During any period of statutory holiday, a worker is entitled to be paid at the rate of a week’s pay for each week of holiday.

SI 1998/1833, reg 16(1) (subscription sensitive)

The Employment Rights Act sets out the method of calculating a week’s pay except that references to ‘employee’ in the ERA 1996 should be read as ‘worker’ and ‘the calculation date’ should be read as ‘the first day of the period of leave in question’.

SI 1998/1833, regs 16(2), 16(3) (subscription sensitive); ERA 1996, ss 221–224

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