Payment In Lieu of Outstanding Holidays on Termination


All workers are entitled to receive a payment in lieu of untaken statutory holiday when their employment is terminated – whatever the reason for the termination.
Every worker is entitled to receive a minimum of 5.6 weeks holiday per year (pro-rated for part time staff) and employers cannot contract out of this. This is known as statutory holiday.
However, if you offer your staff a more generous holiday entitlement, you can include a contractual term in their contracts which expressly states that no payment in lieu of any outstanding contractual entitlement over and above the statutory minimum entitlement will be paid if they are dismissed for gross misconduct; But if your contracts don’t include this restriction, you can’t make the deduction and will have to make a payment for all accrued statutory and contractual holiday on termination.
Remember: workers are only entitled to be paid for holidays that have accrued during the current holiday year unless they were sick in previous leave years. In these circumstances, up to 20 days untaken holiday (for full time staff) can be rolled over into the current holiday year.

Contact Richard on 07850 208701 if you need a review of your contracts of employment to ensure that this and many other issues have been fully covered in the wording currently applied.