The Court of Justice for the European Union (CJEU) has made it clear that employers must give all staff accurate information about their right to paid holiday and take steps to make sure they actually take it before the end of the leave year. If they don't workers can roll over up to four weeks leave into the next holiday year.
All workers (apart from those who are genuinely self-employed) must receive at least 5.6 weeks paid holiday each year (pro-rated for part-time staff). This is the minimum set out in the Working Time Regulations.
Not all workers are told they have the right to take paid holiday leave. Employers only have to provide written details of paid holiday (and lots of other relevant information) to staff they engage as employees. This must be provided within two months of their start date. But casual staff are often engaged as workers (not employees) and do not have a legal right to receive a written statement or contract setting out their terms. As Matthew Taylor pointed out in his review of Modern Working Practices, those without contracts often don't know they have a right to paid holiday and don't take any during employment or receive a payment in lieu of accrued holiday at the end of it.
The CJEU considered two cases: Kreuziger v Land Berlin and Max-Planck-Gesellschaft v Shimizu. Both cases involved German law which said that workers would only receive a payment in lieu of accrued holiday when their employment ended if their employer had prevented them from taking it. This meant that workers had to ask to take all outstanding leave first.
Neither Mr Kreuziger or Mr Shimizu asked to take their outstanding holiday before they left but Mr Shimizu's employer did write and tell him he had outstanding holiday and asked him to take this.
Mr K asked his employer for a payment for outstanding holiday that accrued over five months. Mr S asked for payment for 51 days outstanding holiday which spanned two leave years. Their employers refused (relying on German law) and the issues eventually wound up before the CJEU.
The court laid down important principles which apply to UK employers:
- Workers are the weaker party in an employment relationship and employers must not do anything to deter them from taking annual leave.
- Employers must make sure that workers take annual leave by informing them of their rights and "encouraging" them to take it.
- This information should be accurate and make it clear when rights will expire (such as at end of the leave year) and be given early enough for the worker to take it.
This suggests that employers will need to do more than simply have a written policy in place.
Employers will also have to prove they have done this. If they can't then any restrictions which stop the worker carrying over holiday into a new leave year will not apply.
In line with other decisions of the CJEU, this applies to the first four weeks leave only. Employers are entitled to operate a "use it or lose it" approach to the remaining 1.6 weeks holiday.
These cases will now go back to the German courts to determine if Mr K and Mr S should receive compensation for all untaken leave.
Tips for UK employers
- Determine which members of staff are entitled to paid holiday. Remember: some self employed contractors may have worker status.
- Make sure all staff, including any you engage on a casual basis, receive written details of the amount of paid holiday they can take and how to apply for it.
- Set up an alert system to notify you of any worker who has not taken, or booked to take, at least four weeks leave. I suggest that this is triggered at least three months before the end of the leave year.
- Make sure any casual staff who have not taken paid holiday receive an appropriate payment in lieu when they leave.
- Ask managers to speak to anyone you have identified who hasn't yet taken four weeks leave to encourage them to book it as soon as possible. Try to find out why they haven't done so yet as this might alert you to other problems. Keep a note of that conversation and, if the individual still doesn't make a request to take leave, write to them. Explain that they must take at least four weeks leave before the end of the leave year and make it clear that if they do not take it, they will lose the right to carry it over (if that is what your policy says).
- If the worker still does not book leave, you could insist they take it. You should give as much notice as set out in their contract. If none is stipulated, this should be at least twice as long as the holiday. So, if you want your employee to take a week off you should give them at least two weeks notice of this.
- You do not have to write to staff who have already taken four weeks leave even if, at the end of the year, they still have leave remaining.
- Different rules apply to staff who don't take leave because they are ill or are on maternity leave.
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