Employees have a right to paid annual leave. The statutory minimum holiday entitlement for an employee is 5.6 weeks. For a full time employee working a Monday to Friday job, this equates to 28 days’ paid holiday in the year. Employees working less than a five day week are entitled to a pro rata number of days’ annual leave.

Statutory annual leave entitlement is inclusive of any bank, public holidays or other fixed closures determined by the employer. If a company gives only the statutory minimum amount of annual leave and that company closes on 8 bank / public holidays in a year, this means that a full-time employee working for that employer will have 20 days’ annual leave to be taken at times during the year that are mutually convenient for the employer and employee. As an aside, it is worth noting that, unless the contract of employment provides to the contrary, there is no automatic right to any particular bank holiday off work for employees employed in the private sector.

Sometimes employees will not avail of their full annual leave entitlement and will request payment in lieu of holidays that had been accrued by the end of the year but not taken. Often this will seem like an attractive proposition for both the employer and the employee. From the employee’s perspective, this will lead to additional income and, from the employer’s perspective, there is no need to arrange for cover for the individual as they will not be taking holiday. This can be particularly attractive to an employer in very busy periods.

Employers should however note that the purpose of the law granting employees a statutory minimum number of weeks’ paid holiday in the year is to enable the employee to benefit from paid time away from the workplace environment. There are sound health and safety reasons for providing employees with this entitlement and there can be dangers to health and wellbeing if people do not take sufficient time off work during the year. For this reason, the law does not allow the employer and employee to contract out of the statutory minimum holiday entitlement. The exception to this is where the employment relationship is terminating. In these circumstances, if the employee has taken less leave than has been accrued in the portion of the year in which they have worked, the employer should make a payment in lieu of accrued holiday upon termination of the employment.

Employers can adopt a “use them or lose them” policy and are not obliged to police employees to make sure that they avail of their full entitlement but they cannot encourage an employee to take less than the statutory minimum holiday entitlement by paying in lieu of accrued holidays.

If an employee has a contractual entitlement to more holidays than the statutory minimum, the employer and employee can make their own arrangements for the scenario whereby an employee has accrued annual leave by the end of the year that they have not taken. So, for instance if an employee has a contractual entitlement to 35 days’ holiday in the year and takes 30 days, the employer can agree to pay the employee in lieu of the extra week’s holiday that has been accrued but not taken. There is no obligation to do this but there is nothing wrong with it either. If an employee working a 5 day week has an entitlement to 35 days’ holiday in the year and only takes 25 days, then the employer may only pay in lieu of 7 days’ accrued holiday a paying in lieu of holidays up to 28 days in the year would not be permitted.

Annual leave is a complex area and tends to raise all sorts of enquiries and cause a lot of confusion and readers are encouraged to take specific advice on their situation if there is a query relating to a particular individual and their annual leave entitlement.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.