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Holiday pay on termination of employment: Questions answered

Suppose a job offer has been accepted and the contract of employment is in effect - but after only a few weeks the employee decides to move on. Are they entitled to any holiday pay when they leave?

Employees entitled to holiday accrued

It's a common misconception that outstanding holiday pay is automatically lost when an employee leaves. But no matter how long an employee has been working, he or she has the right to be paid for leave accrued during that time.

It might seem awkward making the calculations for a few weeks, days or even half days, but it's more straightforward than many think.

To work it out, employers should multiply the period of leave to which a worker is entitled by the proportion of his or her leave year that had been used up by the time they left their job. Then they need to subtract the leave taken by the worker during this period. This will give them the number of weeks or days' pay due.

Employers may use different methods to calculate holiday pay. If such methods are fair and clearly set out in writing, there's much less potential for claims to be made at an employment tribunal.

More than fair share

A less common situation is when a worker has taken more leave than they are entitled to when employment is terminated.

Employers should ensure the rules to cover this situation are clearly outlined in the employment contract.

This might state that on termination of employment the worker agrees to make up for that leave through payment, additional work or other means.

Without such an agreement, an employer should be cautious about withholding the value of the extra holiday leave, because a worker may have the right to submit a claim to an employment tribunal for unauthorised deductions to wages.

Acas publications and services

Acas has detailed information about Terminating employment - notice periods and pay, including help with Statutory or contractual notice periods. There's also the pdf icon Advice leaflet - Holidays and holiday pay [266kb], which covers many related topics.

Acas can help you with Contracts of employment, including with its step-by-step guide on how to establish a New employee's contract, and Useful templates for letters, forms and checklists.

Acas experts can also visit your organisation and develop terms and conditions of employment and help you minimise the potential for disputes. See Contracts and hours: how Acas can help for more information.

Related practical training is also available on Contracts and terms and conditions, Managing change, Handling difficult conversations, and for new employers, Employing People - A Practical Introduction.

For free, impartial advice and guidance visit Acas Helpline Online.

Visit the Acas Training Courses, Workshops and Projects area for more information.


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