Statutory holiday entitlement: bank holidays

Sarah-Marie Williams and Nathasha Aly of Clyde & Co LLP continue a series of articles on statutory holiday entitlement with a look at bank holidays. They highlight the importance of making contractual terms clear in relation to time off on bank holidays, and examine various issues for employers concerning bank holidays.

Entitlement to bank holidays

Contrary to popular belief, employees have no automatic or statutory entitlement to take time off on bank and public holidays. The Government increased the entitlement to statutory holiday to fulfil its manifesto commitment to extend the right to holiday to include the equivalent of the eight bank and public holidays in England and Wales, in addition to the pre-existing four-week entitlement. Under the amended Working Time Regulations 1998 (SI 1998/1833), workers are now entitled to 5.6 weeks' holiday, which can include bank and public holidays. However, the increase in leave does not herald a change to employees' rights in relation to time off for bank and public holidays.

The only sector in which employees may have a de facto right to time off on bank holidays is the banking sector. This is due to the fact that, under the Banking and Financial Dealings Act 1971, bank employees cannot be compelled to work on bank holidays.

Contractual terms

Whether or not employees are entitled to time off on bank and public holidays is determined by the contract of employment. Employers that need employees to work on bank and public holidays (for example, employers in the retail, health and security sectors) should make the requirement to work clear in the contract or statement of terms and conditions. Failure to make the terms clear results in ambiguity, which may work to an employer's disadvantage.

Where an employer wishes to limit employees' annual paid holiday entitlement to the statutory minimum of 5.6 weeks (the equivalent of 28 days' leave for an employee working a five-day week), it should expressly state in the contract or written statement of terms that holiday entitlement is inclusive of bank and public holidays.

Prior to the increase in holidays (see Statutory holiday entitlement: overview in this series for more details), many employers worded contracts to the effect that employees were entitled to "statutory entitlement plus bank and public holidays". Previously, this wording would have granted an entitlement to 20 days' leave (for an employee working a five-day week) plus eight bank and public holidays. Following the increase, it denotes an entitlement to 28 days' leave plus eight bank and public holidays. Employers should check contracts carefully to avoid falling into the trap of granting a contractual entitlement that exceeds the intended level.

Under s.1 of the Employment Rights Act 1996, employers must give new employees a written statement of terms and conditions of employment. The required terms are often incorporated into a written contract. Under s.1(4)(d)(i) of the Act, the statement must contain terms relating to the employee's holiday entitlement, including bank and public holidays, and holiday pay. Employers must provide sufficient detail to enable employees to calculate precisely their entitlement, including their entitlement to accrued holiday pay on termination. If an employer wants its employees to take their holiday on any or all of the bank and public holidays, the written statement should say so.

Employers should also stipulate the rate of pay for working on a bank or public holiday. Unless the contract so provides, there is no right to be paid a higher rate than normal for working on a bank holiday.

Whether or not employees are entitled to time off in lieu of bank holidays worked depends on their overall entitlement. If the entitlement is limited to the statutory minimum and employees work on a bank holiday, they must have a day off in lieu so that the total paid leave is 28 days per year (if they work a five-day week). Where the entitlement exceeds the statutory minimum, whether or not the employer must give a day off in lieu depends on the terms of the contract.

Part-time workers

Under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551), part-time workers are entitled to the same terms as comparable full-time workers but on a pro rated basis. This can create difficulties in relation to bank and public holidays. Where employers include bank holidays in the statutory minimum entitlement, part-time workers must be given a pro rated entitlement to the statutory minimum, depending on the number of hours or days worked per week.

However, where an employer grants an entitlement that exceeds the statutory minimum, it needs to consider how to approach the issue of bank and public holidays in relation to its part-time employees. Where the employer allows paid time off for bank holidays only on days that employees normally work, part-time employees who do not work on Mondays, and therefore are not paid for those bank holidays, will lose out when compared to full-time workers, because a large number of bank holidays fall on Mondays. However, part-time workers who do work on Mondays, and are given paid time off for Monday bank holidays as a result, receive proportionately more paid holiday.

Where the entitlement exceeds the statutory minimum, employers that are challenged for not giving part-time workers a day off in lieu of bank holidays that have fallen on days that they do not work may be able to rely on McMenemy v Capita Business Services Ltd [2007] IRLR 400 CS. The employee in McMenemy worked Wednesday to Friday and claimed that his lack of entitlement to time off in lieu of Monday bank holidays amounted to less favourable treatment under the 2000 Regulations. The Court of Session held that the cause of the difference in treatment was the fact that he did not work on Mondays, not his part-time status. Therefore his claim failed. However, in Sharma and others v Manchester City Council [2008] IRLR 336 EAT, which was not a case concerning bank holidays, the Employment Appeal Tribunal held that part-time status does not need to be the sole reason for less favourable treatment, for a complaint of unlawful discrimination to succeed.

One way for employers to avoid any discrepancy in treatment, and reduce the likelihood of claims by part-time employees on the grounds that they have not been given sufficient paid bank holidays, is to give part-time employees a pro-rated allowance for paid bank holidays, irrespective of whether or not they normally work on the days on which bank holidays fall. This approach has been put forward by BERR in its Law and best practice - a detailed guide for employers and part-timers (on its website).

Bank holidays during maternity leave

During maternity leave employees are entitled to the benefit of their contractual terms, with the exception of remuneration. Where bank and public holidays inevitably occur during periods of maternity leave, employees are unable to take them when they fall, due to being on leave. The issue is whether or not employees are entitled to take time off in lieu, or be paid in lieu, of missed bank holidays.

The European Court of Justice (ECJ) considered the issue of holiday and maternity leave in Merino Gómez v Continental Industrias del Caucho SA [2004] IRLR 407 ECJ. Following Gómez, it is likely that, where bank holidays form part of the statutory entitlement, employees on maternity leave must be given time off in lieu of bank holidays that fall during the maternity leave period. The ECJ held that pregnant workers have a dual entitlement to annual leave and maternity leave and must be able to take their annual leave during a period other than their period of maternity leave. Although the ECJ did not address the issue of carry over of leave, which is permitted by the 1998 Regulations only in relation to 1.6 weeks' leave, and if a relevant agreement allows, it is advisable for employers to allow employees on maternity leave to take their statutory leave (including the bank holidays) either before or after their maternity leave.

However, if the employer grants paid time off on bank holidays, in addition to the statutory minimum, the employee's potential right to a compensatory day off or pay in lieu in respect of a bank holiday depends on the terms of her contract of employment.

If employees who are off sick are able to take days off in lieu of untaken bank holidays it is arguable that the employer should allow women on maternity leave to do the same. Failure to do so could result in employees bringing successful sex discrimination claims against it.

Although Gómez concerned maternity leave, it is advisable for employers to follow the same principle in relation to adoption and paternity leave and allow employees to take a day off in lieu of untaken bank and public holidays if bank holidays form part of the statutory annual holiday entitlement of 5.6 weeks.

Next week's topic of the week article will be a case study on statutory holidays and will be published on 18 May.

Sarah-Marie Williams (Sarah-Marie.Williams@clydeco.com) is a solicitor and Nathasha Aly (Nathasha.Aly@clydeco.com) is a trainee solicitor at Clyde & Co LLP.

Further information on Clyde & Co LLP can be accessed at www.clydeco.com.