Annual leave and holiday pay

Sue DennehyEditor's message: The right to paid annual leave is set out in the Working Time Regulations, which derive from EU law. The Regulations came into force in 1998, resulting in an extra 96 million days a year of paid holiday (according to a TUC estimate).

The four weeks’ minimum leave under EU law was boosted by the introduction of a further period of 1.6 weeks' domestic annual leave in 2007 - meaning that workers are currently entitled to at least 5.6 weeks’ holiday a year (which can include bank and public holidays), paid at their normal rate of pay.

In recent years, a number of European Court of Justice (ECJ) decisions in relation to the operation of paid annual leave have muddied the waters for employers. Not only has the ECJ ruled that paid annual leave continues to accrue during sick leave, and can be carried over if not taken in the relevant leave year, but it has also decided that the calculation of holiday pay should be based not just on basic pay but on various other payments such as overtime and commission. However, this has left a number of important questions, including exactly how this should be worked out in practice.

A change to the way holiday pay is calculated for workers with irregular hours will be introduced on 6 April 2020. The reference period for calculating a worker's average weekly pay will increase from 12 to 52 weeks, discarding any weeks the worker did not earn pay.

Sue Dennehy, employment law editor

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HR and legal information and guidance relating to annual leave and holiday pay.