Self Employed, Employed and Holiday Pay

In the UK, most workers are entitled to 5.6 weeks of paid holiday per year, with part time workers the same, pro-rata. Self employed workers, of course, are not covered by this statutory regulation, but what happens when there is an issue over whether someone is employed or self employed? A recent case where this debate took place ended up with a man, whom a company believed was self employed, was awarded 13 years of backdated holiday pay, on the basis that he had really been an employee.

The details of this case

An EU court recently awarded a man 13 years of backdated holiday pay, His employers had refused to pay him holiday pay on the basis that he was “self-employed” and therefore any holiday he took was unpaid. The Court supported the man’s claim for 13 years worth of unpaid and untaken annual leave despite him having a “self-employed commission-only” contract.

This decision is significant and may encourage employers to rethink how they categorise staff as the financial incentives for using only self-employed workers will be reduced if they have to pay holiday pay and perhaps other benefits such as Statutory Sick Pay to them as they do to employed staff.

Holiday pay rules are complex

An employer cannot pay an employee for untaken holiday. Every employee is entitled to and must take 5.6 weeks each year (pro rata for part-time employees). If they do not take this they cannot be paid for it in lieu.

The only exception to this is if an employee leaves part way through the holiday year they are entitled to be paid for any holiday that is owing to them based on the proportion of the holiday year they have been employed.

Employees are not entitled to paid public holidays. But, what about sick leave, maternity and paternity leave?

Anyone who is on sick leave or maternity or paternity leave continues to accrue holiday and they are entitled to take this or be paid for it when they return to work.  So if an employee is off sick for a year they can have a further 5.6 weeks off when they return to work.  The same applies to a woman returning to work from maternity leave.

When an employee goes on holiday they must not be disadvantaged in their pay.  Their pay during the period they are on holiday must reflect their normal pay including any regular commission or overtime payments.  If commission and overtime is not regular it is not included in the holiday pay calculation.

Finally, Overtime………..

An employee who has a contract which states there is guaranteed overtime must be paid this regularly even if it is not worked and therefore it would be included in the holiday pay calculation.  If an employee does do overtime regularly even if it is not part of their contract than this would be taken into account for their holiday pay calculation.

If any of this sounds confusing, contact us

As this article shows, payroll can be complicated, especially when it comes to holiday pay ans other entitlements.

If you need some help and advice, please contact us or call us on 0121 422 0550.

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