The Human Resource

A head for business, a heart for people

Holidays and your employees

A guide for small & medium businesses

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Contents Introduction

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Holiday entitlement

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Public holidays

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Religious holidays

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The holiday year and carryover

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Part timers and holiday entitlement

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New starters and holidays

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Requesting holiday bookings

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Holiday pay

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Holiday pay for zero hours contracts and casuals

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Holiday entitlement during long term absence

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Back to work

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Introduction Paid holidays are one of the most prized benefits for employees and the policies you decide on can have a major impact on how you’re perceived as an employer. Treating everyone fairly, balancing everyone’s needs and administering them efficiently can be challenging. Recently there have been changes to the law regarding holiday pay making the process more complex and the employer vulnerable to legal claims. There can be a major slump in productivity when people return to work after a long break, and one in four employees return to work more stressed than they were before their holiday. In this handout we help you through the practicalities, outline your policy options and recommend tactics and strategies to head off the potential problems. Holiday entitlement As a legal minimum, employees are entitled to a minimum of 28 paid working days of holiday entitlement a year, including the 8 days of public holidays. The number of days’ holiday entitlement can be an important factor for people when they’re choosing to join an employer and in deciding whether to leave one employer to go to another. Research has shown that this is particularly important for younger people and those with school age children. As best practice and to remain competitive, you may wish to consider awarding more than the bare minimum. The average paid holidays given by UK employers is 25 days a year plus the 8 days’ public holidays. Over half of employers give additional paid holidays for those with long service, typically up to 5 additional days for those with 6 years’ service. Employers can set down the times when workers must use some of their leave for example a particular week during summer. You can also stop people taking leave at certain times of the year during busy periods. Public holidays The public holidays are: New Year’s Day Good Friday Easter Monday May Day Early summer holiday Late summer holiday Christmas Day Boxing Day

If any of these days fall at the weekend, the following weekdays are the public holidays instead.

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Public holidays do not have to be given as paid leave, and you can choose to include them in the annual entitlement. If you’re closing the office on public holidays and require your employees to use their holidays for these days, this needs to be stipulated in the employment contract. There is no legal right to take bank holidays off work. Some jobs such as retail will require people to work during public holidays and take time off in lieu. This needs to be stipulated in the employment contract.

Religious holidays Some employees will wish to observe religious holidays and festivals that are not public holidays. If any employees want time off from work in such circumstances, they should normally be expected to take this as part of their annual holiday entitlement. You may also consider allowing the person to take time off in lieu or to work weekends or public holidays instead. It would be reasonable to give priority to such requests over other holiday requests. The holiday year and carryover Most organisations have a standard holiday year as the period of time when leave is counted and must be taken. The simplest is the calendar year. However if you have a markedly seasonal workflow in the business, it will be more convenient to set a holiday year that starts and finishes at quieter times, as there will tend to be a cluster of people using up what remains of their holiday at the end of the year. By default, where there is no holiday year stated in the contract of employment, the holiday year begins on the anniversary of the start of their employment. This arrangement is cumbersome once you have a few employees. There needs to be a consistent rule about whether employees can carry over any unused holiday entitlement to the following year, or whether the company has a “use it or lose it” rule: 

You’re well within your rights as an employer to insist that all holiday is used by the end of the holiday year otherwise it’s lost, you just need to communicate it clearly and apply it consistently. Workers do not have an automatic right to carry leave over to the next holiday year.

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On the other hand if you allow any carryover, we recommend that you limit the amount. The maximum carryover is your company’s entitlement less 20 days because workers must take at least four weeks statutory leave. State the latest date the carryover can be used by, for example within 3 months of the new holiday year. Otherwise your employees can

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accumulate a large backlog of holiday that it will be inconvenient for them to take, and if they leave you will have to pay the untaken days. Part timers and holiday entitlement Part-timers who work five days a week, the same set hours each day, receive the same number of days’ holiday entitlement as full-timers. Their minimum leave is 28 of their working days a year. Part-timers working less than 5 days a week has their holiday entitlement apportioned on a pro-rate basis. For example an employee working three days a week on the same set hours each day receives three-fifths of the full-time entitlement. For those who don’t work the same number of hours each day, their pro-rated holidays are based on the hours they work in proportion to the full-time hours. Their contracts should state annual leave in terms of hours and not days. Online calculators can help: see https://www.gov.uk/calculate-your-holidayentitlement One complication for part-timers working less than 5 days a week is that some work patterns will include more public holidays than others. For example, someone who never works Mondays will have more public holidays in a year than someone who always works Mondays, because at least four public holidays a year fall on a Monday. To ensure fairness and equal treatment for all part-time employees, your company will need to have a process in place for calculating pro-rated public holidays for everyone working less than 5 days a week. The simplest way to do this is to work out how many of the 8 days’ public holiday a year are proportionate to the employee’s working hours, include this in their annual entitlement, and tell then they must use a day of their holiday entitlement for each public holiday falling on one of their usual working days. New starters and holidays Depending on the point in your holiday year when they start, new employees receive pro-rated holiday entitlement during their first year. For example, if your holiday year corresponds to the calendar year and someone starts on 1st July, their first year’s entitlement is half the entitlement your company gives. Most employers give new workers all their legal minimum annual leave entitlement from day one of their employment. As good practice you should honour any holidays that a new employee has already booked, otherwise they may regret joining you!

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You could apply an 'accruals' system during the first year of employment so that workers have one twelfth of their leave released for booking at the start of each month. Requesting holiday bookings Holiday needs to be taken at times agreed in advance and you should advise your employees not to make any definite bookings to go away until their leave has been approved. Encourage people to talk to their colleagues and the person they work for too, as this is the easiest way of ensuring that holiday times don’t clash. Depending on the size of your company, holiday requests and approvals can be handled by emails, wall planners, forms or online employee self service software. You can set a maximum for the number of days that can be taken as single days, for example no more than 10 single days in a year. This ensures that blocks of time are taken and the employee has at least one complete break from work a year. An employer can refuse a holiday booking request and you may sometimes need to do so at popular holiday times in order to meet your business needs. The summer holiday period can be a particularly busy time for annual leave requests and it can be difficult balancing everyone's needs, keeping your business running while the sun shines at the same time as the parents in your workforce are juggling childcare with work and school holidays. It’s important that you’re fair and consistent with all staff when considering requests with a policy about when leave can and can’t be taken, how many people can be off at any one time etc. You could agree a request for, say, three weeks holiday during the school summer break depending on the levels of staff off at any one time - and you can also refuse this request if too many people are off. The Human Resource will be pleased to advise on a holiday policy that fits with the requirements of your business. You can require a certain amount of notice to be given by the employee for longer holiday bookings, such as the twice the period of leave to be taken. So for example if a week's leave is requested then two weeks' notice should be given. However as you can refuse a request in any case, this seems an unnecessary complexity. Holiday pay Holiday pay is the pay that is normally received. This includes:  elements such as shift allowances and premiums such as pay at time and a half, and standby and call out payments.

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Compulsory overtime, where the employee is required to work overtime when not on holiday, must be included in the holiday pay calculation irrespective of the fact that no overtime is worked during holidays. For sales roles, commission earned on previous sales must be included in the calculation of holiday pay. Travel and other allowances that are treated as taxable remuneration must be also included in the calculation of holiday pay even though the employee isn’t travelling for work while on holiday.

This is a new development in employment case law and if your payroll function has not been calculating holiday pay in this way, you should ensure they update their practices. Workers can raise a grievance about an underpayment of holiday pay by bringing a claim in an Employment Tribunal within three months’ less one day from when the payment was due. They must first contact ACAS to start the mandatory Early Conciliation procedure. Underpaid statutory holiday pay can also give rise to a claim of unlawful deductions from wages, and in such cases the Employment Tribunal will look back for two years from the complaint. If the worker takes this latter route, it could mean the employer is faced with a claim for back-pay for underpaid holiday pay going back 2 years, from both current employees and ex-employees. Holiday pay for zero hours contracts and casuals If the worker has no normal working hours, for example because they work on a zero hours contract or are casuals, the calculation of their holiday pay should be based on the average pay over the last 12 weeks. Holiday entitlement during long term absence Employees have the right to build up (‘accrue’) holiday entitlement during maternity, paternity and adoption leave. They can use up the paid time to extend maternity leave for example, or to work part-time while receiving full-time pay.

They also have the right to build up holiday entitlement while off work sick and can choose to take holiday at the same time as sick leave. Christmas shutdown It may not be practical to open up the workplace for one or two days in a full week between Christmas and New Year. If you decide that the workplace will shut down during this period, communicate it well in advance to enable people to arrange their time around it, especially if you’re requiring people to reserve time from their holiday entitlement to cover the working days when you’re closed. The number of working days that need to be reserved for a Christmas shut down will vary depending which day of the week Christmas Day falls on.

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You could decide to pay people for these Christmas shutdown days in addition to their entitlement. Holidays when the employee leaves When an employee leaves and at the end of a fixed term contract, they need to be paid for any annual leave accrued but not taken. If they have taken more than the accrued amount, pay for the additional amount should be deducted from their leaving salary. Back to work A recent UK survey has found that nearly 1 in 4 holidaymakers return from their break feeling more stressed than when they left. The responses indicated that whilst most of us think of a summer holiday as a time to relax and recuperate, the realities of taking some time out can often take their toll. When we don’t have the everyday pressures of life to think about, the brain will tend to find other worries to keep it occupied. So while people will usually return to their roles raring to go and recharged after enjoying a summer holiday, one in four of your employees return more stressed than when they left. It’s easy to underestimate the impact the summer holidays can have on your workforce and your business as a whole, but taking some timely action can help minimize the problems. Managing holidays can be difficult when you’re running a business, and a flexible approach is often key. If you want to ensure that your business doesn’t suffer, here are a few carefully planned tactics and strategies for you to manage returns after the summer holidays that could make all the difference: Organise cover while staff are away Imagine the stress of a conscientious member of staff dreading coming back to work because they know that their inbox will be at bursting point, they’ll have messages from a hundred and one different people, they need to catch up with the work that they missed, and they need to do it all before 5pm the same day. Consider how you can manage the team’s workload so returning members of staff aren’t overwhelmed. You might be able to put another team member in charge of clearing out inboxes, or you may decide that it would be only fair to make sure that your staff aren’t penalised if they can’t ‘catch up’ as quickly as you might like. Rather than focusing on smaller issues like a few days of lowered productivity, think about the bigger picture. Your staff should feel suitably supported when they come back to work, and that’s the only way that you’re going to create a happy and productive workforce.

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Take the time to have a quick catch-up Over a fortnight’s holiday relaxing on the beach, back in the workplace projects might have been completed, goalposts may have moved, and you might have even welcomed new members of staff to the team. It’s easy for those who have been away for a little while to feel like they’re returning to a completely different environment. Make it part of your working processes to invite anyone who’s been on leave into your office to have a catch-up chat so you can brief them on anything that they may need to be aware of. Balance this by showing a genuine interest in their break and what they got up to. This doesn’t have to be a long and drawn out affair. A five-minute chat will generally suffice, and it can make all the difference to how your employees feel during their first few days back on the job. Is it post-holiday blues or something more serious? Most of us have experienced the post-holiday blues, and they can certainly leave you feeling deflated for a couple of days whilst you ease yourself back into reality. There’s a big difference with feeling a little down and suffering from mental health problems like depression and anxiety. ACAS estimates that £30 billion is lost each year due to these issues, so it may be time to start thinking about what you can do to combat the impact on your workplace. There is plenty of support out there, so you certainly don’t have to manage on your own. If mental health is an issue in your workplace, it may be time to call in some extra help so you can develop a strategy for supporting your staff. Lighten the mood Your staff are there to get a job done. That goes without saying. But introducing an element of fun into proceedings can really help to keep people on track and ensure that they feel like they’re part of something bigger. We spend a lot of time at work, and it can make a big difference if we’re encouraged to take part in some more social aspects of working life. Think about what you could do to lighten the mood and raise spirits. You might want to consider the following:    

A team-building event After-work dinner or drinks Pizza Fridays, or a few drinks in the office on a Friday evening Recreational activities during the working day, such as an exercise class or language lessons

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Gestures like this don’t have to cost you a fortune, and they could have a big impact on overall morale. If you’re uncertain about what would work for your staff, ask them. Bring a cross-section of your workforce together, and ask for their opinions on what they feel would be a great fit for your workers. Take the feedback onboard, and act on it wherever possible. This type of informal consultation shows that you care about your staff, and are willing to go the extra mile to ensure that they’re happy and motivated. Keep projects varied and interesting There are elements of almost any job that are less desirable than others. It’s a simple fact of life that sometimes there will be tasks that need to be taken care of that are dull and boring. If your workers know that they’re returning to something that they actively dislike though, it’s bound to dampen their spirits. Take this as an opportunity to reassess how you manage the distribution of various projects, and think about how you can ensure that everyone gets a fair chance to get involved with the more exciting activities. You may want to reassign certain members of staff so they get the chance to develop their skills in a different area, for example. They say that variety is the spice of life, and it’s certainly true that shaking things up a little bit from time to time can inject some new excitement into your business. Keep your eyes open, and assess how the changes are received. It’s quite likely that you’ll discover that certain people really excel when they’re working on particular tasks, and you can definitely use that information to your advantage in the future.

Having best practices embedded into your company culture and day-to-day working arrangements is essential if you want to make sure that you’re constantly making big progress when it comes to business goals and growth. If you feel like your HR practices could do with an overhaul, we’d love to help. We offer a free consultation, and we’d be happy to answer any questions that you might have and assess how we could work together to get you firmly on the right track. Email The Human Resource on [email protected] to arrange a no-obligation chat. 10

More information about the help we provide to business owners with employment is on our website www.thehr.co.uk. © The Human Resource 2015

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