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Payment of token sum for holidays not permissible

BY Richard Woods
Employment Law & HR
BG Purple

The Working Time Regulations provide that, if a worker leaves an organisation during a holiday year, he or she is entitled to a payment in lieu of untaken holidays.

The Regulations go on to state that this payment shall be such sum as is provided in a ‘relevant agreement’ (generally an employee’s contract of employment). On a literal reading, this would seem to suggest that, provided the contract states a specific sum to be paid in lieu, not matter how small, the employer is not in breach of the Regulations. 

In the case of Podlasiak v Edinburgh Woollen Mill, P was employed under a zero hours contract.  The contract provided that, if he left employment during the holiday year, he would be paid £1 in lieu of any untaken holiday.  P left during the holiday year owed three days’ untaken leave.  He challenged the £1 payment as being less money that he ought to have been paid for his holidays.  The employment tribunal, while acknowledging that on a literal reading of the Regulations the payment of £1 was lawful, nevertheless upheld P’s claim finding that this method of calculation did not accord with the European Working Time Directive.  

Holiday entitlement continues to generate case law.  Any employers in doubt as to how to calculate holiday entitlement should seek guidance from their legal manager at LAW.

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