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Holidays – Use it or lose it?

04 Mar 2019

A recent case in the European Court of Justice (ECJ) has considered the circumstances in which untaken holiday may be rolled over or a payment in lieu might be made.

The case involved an employee who had left employment with 51 days holiday accrued over the previous two years. The employer refused to make a payment in lieu on the basis that the employee had failed to seek to exercise their right to annual leave. This therefore raised the question of whether employers could adopt a “use it or lose it” approach to statutory holiday entitlement.

In its decision, the ECJ made clear the importance of paid annual leave and that the worker is the “weaker party” in the relationship, requiring protection of their rights. The court therefore found that an individual must be provided with sufficient opportunity to take annual leave and stated it was the employers duty to “ensure, specifically and transparently, that the worker is actually given the opportunity to take the paid annual leave…by encouraging him, formally if need be……… while informing him accurately and in good time…and that if he does not take it, it will be lost”.

What does this mean?

This decision means that the “use or lose it” approach can only be taken if an employer has ensured that workers are given the opportunity to take leave, even if they have not specifically requested it.

Hay & Kilner Solicitor – Tom Clarke

A positive for UK employers is that our domestic law does not allow for payments in lieu of accrued holiday save for on termination but there is a risk our employment tribunals will decide otherwise or say that untaken holiday allowance could be rolled over into the following leave year. Employers should consider the following:

  • Regularly encouraging staff throughout the year to take their holiday entitlement (and keeping copies of notices – the burden of proof is on the employer!);
  • Ensuring contracts set out worker’s rights to annual leave and the circumstances around the “use it or lose it” approach;
  • Ensuring there is a policy relating to holiday entitlement and that it is easily accessible;
  • Be mindful that this decision does not mean individuals can be forced to take annual leave, just that they ideally will be actively encouraged to take it; and
  • Remember that this decision only relates to four weeks of leave entitlement (in line with the EU minimum) – employers can adopt the “use it or lose it” approach for the additional 1.6 weeks.

For more information on any of the above, or how we can help you or your business, please contact Tom Clarke, or call 0191 232 8345.