Untaken holiday pay: What is the law?

09 July 2019

Unused holiday pay, or pay in lieu of holidays, is something employees often ask about. They may feel they’re too busy to take time off. Or they don’t want time off work, but don’t want to lose the benefits. After all, if staff receive pay for untaken holidays, they could have up to 28 days more pay in their yearly pay packet. Is it possible? This guide explains everything you need to know.

Payment for missed holiday days

When an employee asks, “Can I be paid for untaken holidays (UK)?” the answer is no. That’s if they only get the statutory 5.6 weeks’ leave. When an employee works for you, they must take their statutory holiday. If they don’t, then they don’t get paid for it. This is because the point of holiday isn’t about holiday pay. The purpose of holiday is to take time off work for rest and relaxation. So if employees stay at work and are being paid in lieu, you’re not giving your staff time off for their health and wellbeing. This applies to all type of workers. So, again, it’s common for a question such as “Can I be paid for untaken holidays?” Agency workers will also have the same answer, or any part-time or term-time staff. What about when an employee can’t take the holiday in the leave year because they’ve been off work because of long-term illness or pregnancy? EU law protects these workers by saying they should be able to carry over 4 weeks of holiday (the EU entitlement) to the next leave year so they don’t lose out on their leave.

What about contractual holidays?

Even though UK law gives workers 5.6 weeks’ leave, you can offer more holiday in your employment contracts. If you do, you can have different rules for pay in lieu of these extra holidays. For example, if you offer five days’ extra holiday, your contracts can say that your staff will get paid these at the end of the holiday year if they haven’t taken them. In most companies, the ‘use it or lose it’ rule will apply to these extra days. Where if they receive pay for holidays not taken, it’s simply lost. This stops staff banking up extra days to receive a payout at the end of each leave year.

At the end of employment

The answer to “can I be paid for untaken holidays UK” will be different when the employment is ending and there is outstanding holiday leave. As the employee won’t work for you any longer, they can’t take the leave they would normally claim. So any holiday time they accrue, but do not take at the date of their employment ending, you will have to pay for. This is the case even if you dismiss them, they resign, or face redundancy. If there is a large amount of accrued but untaken holiday, you can limit the amount you will pay by asking the employee to take holiday during their notice period. You can also require them to take holiday, but must give the correct notice to do this. If you don’t pay in lieu for their outstanding holiday at the end of employment, the employee can go to an employment tribunal claiming unpaid holiday pay. If you’re looking at when you leave a job do you get holiday pay, then the answer will be yes for any leave built up, but untaken, by the employee.

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