Know how much holiday to give your staff

Leave and termination of employment

When your workers leave - even if you have dismissed them without notice for gross misconduct - they must receive pay for any holiday they are entitled to in the current leave year but have not taken.

Note: this entitlement is not subject to a minimum period of employment.

Calculating pay due to workers who leave

Pay due can be calculated using the formula (A x B) - C, where:

• A is the total holiday entitlement for the year
• B is the fraction of the year to the date of leaving
• C is the amount of holiday already taken

So if the entitlement is 20 days per year and the employee leaves three months into the year having taken two days off: (20 x 3/12) - 2 = 3 days' leave to be paid in lieu.

You need to get the worker's signed agreement to make a deduction from the final payment to them for any leave taken in excess of their entitlement.

If a worker's employment is terminated, they have the right to be paid for leave accrued during the time of employment, no matter how short a period of employment. In such cases, holiday entitlement is based on the date they would have left if they had worked the full notice period, unless the employee agrees otherwise.

The employment contract or written statement of employment particulars should contain information to enable workers to calculate their entitlement to accrued holiday pay when they leave. 

If a worker takes part of their paid leave entitlement during their notice period you may reduce their notice pay by the amount of holiday pay, provided it is in respect of the same leave year.

Subjects covered in this guide

• Introduction
• Payment for leave
• Public and Bank Holidays
• Restrictions and notice
• Statutory holiday entitlement
• Leave and termination of employment

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