There is much complex case law on holiday pay entitlement under the Working Time Directive. This is a summary of current drafting tips for holiday pay clauses in employment contracts:
• Make clear whether the holiday entitlement includes or excludes public holidays.
• Exclude regulations 15(1) to (4) of the Working Time Regulations, and replace these with the employers own requirements on how much notice the employee needs to give of a planned holiday.
• If the contractual holiday entitlement is more generous than the statutory minimum, the contractor can state that, on termination, only accrued statutory entitlement will be paid in lieu. If so, make sure the contract also states that the first 28 days of holiday taken in the holiday year (including public holidays) shall be deemed to the employee’s statutory leave entitlement under regulation 13 and 13(a) of the Working Time Regulations.
• Make clear that upon termination, if an employee has taken more than their annual leave entitlement then they must refund the holiday pay received for this.
• Make sure the clause requires an employee to use up all of their accrued, but untaken, holiday entitlement during any notice period (including garden leave).
• If the employer’s business closes at any point during the year (e.g. Christmas, New Year) the contract could require employees to take some of their holiday during that period.