An employment tribunal has held that payments in lieu of untaken statutory holiday on termination of employment must be calculated to reflect normal pay.
On termination of employment, a worker is entitled to pay in lieu of unused statutory holiday calculated in accordance with either a relevant agreement, such as an employment contract, or if none, such sum as would have been due had the leave been taken using the formula set out in the Working Time Regulations.
The EAT has previously ruled that an employment contract cannot validly specify a payment in lieu of £0. An employment tribunal has now held that specifying a nominal figure such as £1 is equally invalid: contracts must provide for payment in lieu at least equating to what the employee would have received had they taken the holiday. (Podlasiak v Edinburgh Woollen Mill Ltd)
As a first instance decision this is not binding on other tribunals and could be appealed. However, for the time being, employers may wish to reconsider using such contractual provisions for nominal payment and instead ensure employees are paid in lieu at the same rate as if the holiday had been taken.
Key contacts
Samantha Brown
Managing Partner, Employment, Pensions and Incentives, UK and EMEA, London
Steve Bell
Managing Partner, Employment, Industrial Relations and Safety, Asia and Australia, Melbourne
Emma Rohsler
Partner, Head of Employment, Pensions and Incentives, EMEA, Paris
Tim Leaver
Partner, London
Andrew Taggart
Partner, London
Fatim Jumabhoy
Partner, Head of Employment & Workplace Investigations, Asia, Singapore
Barbara Roth
Partner, New York
Christine Young
Partner, London
Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.