Holiday Pay - What Are Your Minimum Legal Requirements?

Welcome to the first in a series of blogs covering global employment law issues. Each month we will be sending you information about key employment law topics from our offices across the globe. The first of our topics is:

Holiday Pay – What Are Your Minimum Legal Requirements?

United Kingdom

In the United Kingdom, all workers are entitled to 5.6 weeks' paid annual leave each year. A worker is either an employee or someone who contracts to perform work personally, but who cannot be regarded as genuinely self-employed (usually, a casual worker would be caught by this definition). If a worker works a standard five-day week, this means that he or she will be entitled to 28 days' paid leave per year. This total includes public holidays. Workers who work a different number of days per week will have their entitlement adjusted accordingly.

Workers must be paid for their holidays as and when they take them. Employers should not pay a supplement to workers' normal wages to cover holiday pay (known as rolled-up holiday pay) and not pay when holidays are actually taken. Nor can employers pay workers in lieu of holidays, except on termination of employment. A great deal of controversy has arisen recently as to how to calculate holiday pay. Traditionally, employers have paid only basic salary while workers are on holiday. However, recent decisions of the Court of Justice of the European Union and the UK Employment Appeal Tribunal (see our blogs here and here) mean that, in the future, any sums workers earn by way of commission and overtime may need to be included when calculating holiday pay. This could substantially increase the cost to employers of workers' holidays.

United States

In the United States, there is no federal law that entitles employees to vacation, paid or unpaid. Several states regulate voluntary payment for vacation, however. For instance, in Massachusetts, if an employer chooses to provide its employees with paid leave, that paid time off is considered wages; thus, withholding vacation payment is tantamount to illegally withholding wages. Similar laws govern paid vacation policies in California and a number of other states. Employees in those states must be paid for any accrued but unused vacation time upon termination of employment.

A variety of states provide for vacation time for public employees, but no state requires a private employer to offer vacation time. All laws regarding pay for unused leave apply only to employers who...