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Payment in lieu of statutory holiday entitlement

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3 December 2012

You may be interested to note that employers were recently reminded of their obligations to provide paid annual leave to their employees.

A ruling by the European Court in June 2012 pointed out that the ‘entitlement to paid annual leave must be regarded as a particularly important principle of EU social law’.

The Court also confirmed that the ‘purpose of entitlement to paid annual leave is to enable the worker to rest and enjoy a period of relaxation and leisure.’

In the UK statutory annual leave, currently 28 days including bank holidays, is set out in The Working Time Regulations (1998) 
Section (9) of the legislation states:

Leave to which a worker is entitled under this regulation may be taken in installments, but -
(a) it may only be taken in the leave year in respect of which it is due, and
(b) it may not be replaced by a payment in lieu except where the worker’s employment is terminated.
Employers would be advised to ensure that the contracts of employment they issue take into account their legal obligations to provide paid annual leave. This would also apply to any response to requests by their staff for payment in lieu of holidays or to roll holiday entitlement forward into the next year. As with all matters of legislation and employment law you should take formal advice before taking any action.