All workers are entitled to receive a payment in lieu of untaken statutory holiday when their employment is terminated – whatever the reason. That’s the advice from Simon Fenton, partner at the Southampton office of law firm Irwin Mitchell.
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.