The question of an employee taking annual leave does not always arise in isolation and we are often asked about situations where there is another factor or issue and how this affects both the right to take holiday and entitlement to holiday pay.
Below is a sample of some of the questions we are commonly asked about holidays. (Note: workers are entitled to paid annual leave as well as employees notwithstanding that our answers below may just refer to “employees”.)
Can a period of annual leave be taken whilst an employee is off work sick?
Annual leave cannot be taken at the same time as sick leave, as the purposes of the two types of leave are different. If an employee is taking sick leave which runs into a period of pre-arranged holiday, then the employer may not treat the period of pre-arranged holiday as counting towards the employee’s statutory holiday entitlement and should allow them to defer their holiday.
If an employee becomes ill whilst on holiday, the employer may permit the employee to interrupt their period of annual leave and re-credit the relevant days as holiday to be taken at a later date, though the employer would be entitled to request proof of illness in such circumstances.
There may be situations where an employee is off work due to long-term ill health and asks to be allowed to take holiday. For instance, they may be physically unable to work though able to take a holiday or they could have a mental health condition that might be helped by a holiday. In this case, sick leave may be “paused” while the employee takes a holiday and they should get holiday pay for the period of annual leave taken. After the employee has taken holiday, sick leave can continue if they are still not well enough to return to work.
Note that sickness of up to 26 weeks a year (pro rated if the employee joins or leaves part-way through a holiday year) does not affect statutory annual leave accruing[1].
If an employee is sacked for gross misconduct, does the employer have to pay them accrued holiday to the date of dismissal?
Yes, at least as regards their minimum statutory leave entitlement. It is possible to include in employment contracts a provision that, if an employee is dismissed for gross misconduct, they will only be entitled to be paid for accrued but untaken statutory – as opposed to generally more favourable contractual – annual leave. Usually, however (or if the contract does not include such a term), the employee will be entitled to receive all contractual benefits that have accrued up to the date of dismissal. If the employer is entitled to dismiss an employee for gross misconduct (i.e. without notice), termination will take effect when the decision to dismiss them is communicated to the individual concerned.
Does annual leave continue to accrue during a period of maternity leave or adoption leave?
Yes, in brief. During ordinary maternity leave (or ordinary adoption leave), all the employee’s usual terms of employment continue to apply with the exception of terms relating to remuneration. This means that both statutory and contractual annual leave continue to accrue during the period of ordinary maternity or ordinary adoption leave.
During additional maternity leave (and similarly, additional adoption leave), there is no entitlement to contractual annual leave in excess of the statutory minimum. Therefore, the employee will continue to accrue annual leave during their period of additional maternity leave (or additional adoption leave) provided the total holiday taken or accumulated in the leave year does not exceed the 4-week statutory entitlement.
Annual leave cannot be taken at the same time as maternity or adoption leave so the timing of taking leave may need to be considered by the employee. The employee may wish, for example, to take a period of annual leave before their family leave or “tag” it on to the end.
It will be relevant in those circumstances to consider if the employee’s contract (or employer’s annual leave policy) allows the employee to carry over unused leave from one holiday year to the next where the reason for not taking it is due to their maternity or adoption leave. This reflects the fact that there is no statutory right to carry over annual leave from one holiday year to the next except where the employee has not been able to take leave because of Covid[2]. However, employers are usually prepared to be flexible on this point.
Where an employee is on maternity leave, do they have to be allowed time off in lieu for public holidays arising during such maternity leave?
The short answer is it depends on what the employee’s contract says as regards holiday entitlement (total number of days and how it is expressed, e.g. whether inclusive or exclusive of public holidays) and also whether they are on a period of “ordinary” or “additional” maternity leave.
During ordinary maternity leave, statutory and contractual annual leave continue to accrue. This means that the statutory four weeks (pro-rated) plus any additional contractual enhancement should be applied for the period of ordinary maternity leave. Quite often, the contract of employment may confirm that the employee is entitled to x days plus “usual Isle of Man public holidays”, for example. In that case, the employee would be entitled to a proportion of the “x days” annual holiday entitlement corresponding to the period of ordinary maternity leave taken plus public holidays which fall during that time.
As a period of annual leave cannot be taken at the same time as maternity leave, the employer should allow the employee to “tack on” their accrued statutory and contractual leave arising from a period of ordinary maternity leave to their overall maternity leave period or permit them to take it following their return to work, e.g. later in the same leave year. This may include giving credit for a number of public holidays arising during ordinary maternity leave.
In contrast, during additional maternity leave, there is no entitlement to contractual annual leave and only statutory annual leave accrues unless the contract makes it clear that any enhanced contractual allowance is supposed to continue as well. If the annual leave clause in the employee’s contract says that they are entitled to statutory minimum holiday inclusive of public holidays, they will be entitled to carry forward all their statutory holiday (which will entail them being credited with public holidays that fall during the period of their maternity leave anyway). Where the contract wording is different (e.g. the employee is entitled to “statutory leave plus x days” or “x days plus public holidays”), the accrued leave entitlement will normally just be the four statutory weeks. Again, as annual leave cannot be taken during a period of maternity leave, any accrued allowance will need to be taken after or – if the employer permits – before, the period of maternity leave.
When does an employee get “paid” for taking holiday?
The entitlement to paid holiday under the Isle of Man’s Annual Leave Regulations 2006 is to a week’s pay for each week of annual leave, calculated in accordance with the employee’s contract.
For full-time or part-time staff with regular hours, the usual position is that they take their holiday and continue to receive their normal pay even though they are absent from the office. Overtime is not “counted” for the purposes of holiday pay unless it is guaranteed overtime, i.e. required under the contract between the employee and the employer.
For staff who work different hours week to week and/or who have a variable working pattern, holiday pay is calculated by reference to average weekly hours over the preceding 12-week period. This is usually expressed as the right to x hours’ leave and is payable at the time it is taken. If the 12-week period before the employee takes leave is not representative of the hours they usually work (e.g. due to seasonal variations), then the employer can extend the reference period up to 26 weeks under a “relevant agreement” (e.g. the employment contract).
As an alternative to the 12-week look back method of calculating holiday pay, it is also possible in the Isle of Man to pay rolled-up holiday pay (RUHP). This is especially practical for casual and zero hours workers for whom the administration of holiday pay can otherwise be a challenge. With RUHP, the employer adds a stated percentage to the worker’s ordinary wages so they receive holiday incrementally while they work. This is permitted subject to the following conditions:
- a “relevant agreement” must specify the amount or proportion of gross pay which is in respect of a period of annual leave (e.g. 8.33%, which would be consistent with 4 weeks statutory minimum);
- the amount or proportion must be a genuine addition to the regular remuneration (i.e. the usual pay disregarding any element of RUHP); and
- the pay statement must specify the amount of remuneration in respect of the period of annual leave (i.e. separate line itemisation).
Even where a worker is paid RUHP, they still have the right to take time off work during the relevant leave year in line with their contractual and statutory entitlements, however the employer would not then need to pay them (i.e. again) for the annual leave.
When employment ends, an employee is entitled to compensation for accrued, untaken, holiday on a pro rata basis. Conversely, if their contract or written terms so provide, the employer may be entitled to recover payment for holiday taken in excess of the employee’s pro rata entitlement at the date of termination – i.e. where they have taken leave exceeding their accrued allowance.
Have you got an annual leave query with which we can help? If so, please email us: employmenthub@cains.com – we will be happy to consider it and share our thinking.
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References:-
[1] Annual Leave Regulations 2007 (as amended), Regulation 4(4)(b).
[2] See related note on Annual Leave.
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Useful resources:-
https://www.gov.im/media/1369852/holidays-and-holiday-pay-july-2020.pdf
