bCentral Home
Your Online Business Center

Holidays, Sick and Maternity Leave FAQ

The law about leave, and payment in lieu

Holidays and paid annual leave FAQ

How is payment in lieu of holiday calculated?

Under the Working Time Regulations 1998, if a worker's employment ends they are entitled to be paid for any holiday entitlement which remains unused.

Payment should be based on a worker's normal weekly pay:

For workers whose hours do not normally vary, a week's pay is calculated using the basic hours they are contracted to work. Any payment received for overtime is not included, unless it forms part of guaranteed overtime, where an agreement has been made with the employer.

For workers who work on commission or receive a piece rate, a week's pay is calculated by multiplying basic hours by their average hourly rate, taking into account commission or piece rate pay over the previous 12 weeks.

For workers who work shifts where hours and weekly pay vary, a week's pay is calculated by multiplying the average number of hours they work each week by their average hourly rate.

For workers who work irregular hours and receive varying pay levels, such as agency workers, a week's pay is calculated by taking total pay received over the last 12 weeks and dividing it by 12. Any week where no pay was received should be substituted with a week before the 12 weeks, where payment was received

Further Information

For further information see the Department of Trade and Industry web site.

Can an employer count bank holidays as part of an employee�s holiday entitlement?

Bank holidays are days on which banks may close for business and are traditionally taken as public holidays by all employees. There are eight permanent bank and public holidays in England, Wales and Scotland and ten in Northern Ireland.

Bank holidays are widely observed, but it is not a statutory right for employees to take these days as holiday and count them as extra to their annual holiday entitlement. The right to time off or extra pay on a bank holiday is legally dependent on the terms of employment stated in an employee's contract.

Further Information

See the Working Time Regulations 1998 for further information on holiday entitlements and the Department of Trade and Industry for a list of bank holiday dates.

What rights do workers have to paid annual leave?

Under the Working Time Regulations 1998, all full and part-time workers are entitled to four weeks’ paid annual leave on a pro rata basis. Entitlement starts from the first working day. A week’s leave should allow workers to be away from work for the whole of their normal working week, so that if a worker does a 5-day week, he or she is entitled to 20 days’ leave, if a 3-day week, the entitlement is 12 days’ leave, and so on.

The leave entitlement under the regulations is not additional to bank holidays, and workers have no legal right to take bank holidays off.

Workers must give their employer notice of taking leave. Employers and workers can agree on notice periods, but in the absence of an agreement the notice period that a worker must give should be at least twice the period of the leave to be taken.

Employers can set the times that workers take their leave, for example, over Christmas if the business ‘shuts down’ over that period.

If a worker’s employment ends, he or she has a right to be paid for the leave time due and not taken.

Further Information

For further information see the Department of Trade and Industry.

Sign into Microsoft Small Business+ for free web-based training and software support.

sign in
Security information

Find a local Microsoft Small Business Specialist to help with your IT needs

Microsoft Small Business SpecialistMore info >

Enter the Supplier Showcase exhibition
Contact Us
Free business newsletters - subscribe now

Our free newsletters are packed full of business advice and ideas - plus all the latest news

Security information

Get the latest bulletins and updates direct from Microsoft

What do you want your PC to help you with?

What do you want your PC to help you with?