Employment Update: Working time holiday pay

28 September 2007

How to calculate holiday pay if an employee is dismissed during his/her first year of service? The daily rate should be calculated on basis of number of working days (not calendar days) in the year.

From 1 October 2007, employees are entitled, under the Working Time Regulations 1998 (WTR), to twenty four days paid holiday in each year (previously 20 days).

The question of what happens to an employee’s entitlement to be paid for holidays not taken when he or she is dismissed in the first year of service has now been answered in the case of Yarrow v Edwards. The parties agreed that the proportionate holiday outstanding in that case was between two and three days. Under WTR reg 13(6) any fraction of a day must be treated as a whole day, so the employee’s correct entitlement was to three days’ holiday pay. The EAT said that the concept of day-to-day accrual for the purpose of calculating holiday pay entitlement must be by reference to the number of working days in the year and not the number of calendar days.

Point to note –

  • The EAT commented that the principle should be the same whether dealing with actual pay or holiday pay – any outstanding entitlement must be calculated by reference to the number of working days in the year, not calendar days.