Many employers are not aware that paid annual leave was introduced under EU law as a means of better protecting the health and safety of workers. Viewing it from this perspective sometimes helps employers better understand why the legislation appears to be tilted in favor of the employee. While it is important for you to be familiar with your employee’s annual leave entitlements, it is also possible to use paid annual leave to more effectively manage your workforce.
Who is entitled to paid annual leave?
As an employer, you have a statutory obligation to provide paid annual leave to all workers covered by the Organisation of Working Time Act 1997 (OWTA).
The OWTA applies to all employees working under a contract of employment, a contract of apprenticeship, public sector employees (save for the Gardaí and the Defence Forces) and those employed through an employment agency.
Do all employees receive the same annual leave entitlements?
No, the amount of paid annual leave an employee receives is calculated by reference to the amount of work the employee completes during the leave year.
The statutory minimum paid annual leave entitlement for employees can be calculated using one of the following methods:
- an employee who works at least 1,365 hours in a year receives the full entitlement of 4 working weeks of annual leave.
- an employee who works at least 117 hours in a month receives one-third of a working week for each month in the leave year.
- part-time employees are entitled to 8% of the hours worked in a full leave year (but subject to a maximum of four working weeks).
An employee who works for 8 months or more in the annual leave year is entitled to an unbroken period of two weeks’ annual leave.
An employer cannot offer annual leave entitlements below what is set out in the OWTA. However, an employer can contract to provide a greater annual leave entitlement. If an entitlement to annual leave which is greater than the statutory minimum is set out in the employment contract, then this must be respected to avoid claims for breach of contract. If you operate a discretionary contractual annual leave entitlement over the statutory minimum, you must ensure that part-time employees receive a similar annual leave entitlement pro-rated to the one enjoyed by comparable full-time employees.
Sick leave & annual leave
As of August 1st, 2015, employees continue to accrue annual leave while they are absent on medically certified sick leave. Employees who are absent on long-term sick leave which spans more than one leave year will not be permitted to accrue leave indefinitely. Annual leave accrued in any given leave year expires 15 months after the relevant year has ended.
An employee must take their statutory minimum annual leave entitlements within the Company’s annual leave year or within six months of the next leave year. Many businesses may have a policy stipulating that all employees must take all their annual leave within the company’s leave year. The legal obligation is on you as the employer to ensure that employees take all of their statutory minimum annual leave entitlements within the leave year.
Timing of annual leave
The timing of the holiday is determined by the employer following consultation with the employees (at least one month before the holiday) and must take account of the need for employees to reconcile work and family responsibilities.
Annual holidays should normally be taken within the current holiday leave year but any days carried forward must be agreed with the employee and taken within the first six months of the new holiday leave year
Payment in lieu of annual leave
It is not permitted to pay employees in lieu of providing them with their statutory minimum annual leave time off, except upon termination of employment. You may set your own company-specific rules about pay in lieu of any contractual leave provided it does not apply to the statutory minimum paid leave entitlement.
You must ensure employees take their minimum entitlement
It is important for you to be aware that as annual leave is a health and safety requirement, the burden is placed on you as an employer to ensure that employees take their annual leave. It will be no defense for you to say that an employee never requested his/her leave or to pay holiday pay in lieu of the actual time off.
All employees are entitled to holiday pay in respect of any annual leave taken and such pay shall:
- Be paid in advance of the employee taking their leave; and
- Be at a rate equivalent to the employee’s normal weekly rate; and
- Include compensation for board and lodgings where that employee received board and lodgings in the course of their employment.
If an employee works on a time-rate, fixed rate or salary then their normal weekly pay would be equal to the weekly remuneration they received when they last worked before the annual leave commenced. This payment would include any regular bonus or allowance that does not vary and would also include regular rostered overtime.
For employees who work on commission or on a piece-rate, the normal weekly rate is calculated as the average weekly pay over the 13-week period preceding the annual leave. Time spent on annual leave, maternity leave, parental leave, force-majeure leave, adoptive leave and the first 13 weeks of carer’s leave is included as time worked when calculating an employee’s holiday entitlement.
While the legislation sets out that an employer is not obliged to include overtime pay received in calculating an employee’s holiday pay entitlement, such overtime pay will need to be included where overtime is regular and rostered.
Employers should be aware that it is not acceptable to pay an employee a ‘composite rate’ whereby their holiday pay is paid off in a piecemeal fashion through the employee’s weekly, fortnightly or monthly pay. The employee is entitled to receive their holiday pay at the time they actually take their annual leave.
Keep records of annual leave for three years
Records of annual holidays and pay should be kept for three years to ensure you will be in a position to defend any claims by employees.
Employers have a statutory obligation to ‘remunerate’ employees for public and Church holidays. Records of public holidays and pay must be kept for three years.
There are 9 designated public holidays in Ireland:
- January 1st
- Patrick’s Day (17th March)
- Easter Monday
- The first Monday in May
- The first Monday in June
- The first Monday in August
- The last Monday in October
- Christmas Day
- Stephen’s Day
Where a public holiday falls on a Sunday, the employer may, if they wish, transfer the holiday to the next working weekday. An employer can, by giving appropriate notice, substitute any day of public holiday with the Church holiday falling immediately before or after the public holiday.
The Church holidays are:-
- 6th January
- Ascension Thursday
- The Feast of Corpus Christi
- 15th August
- 1st November
- 8th December
There is no substitute day if a Church holiday falls on a Sunday.
Employees who are not entitled to payment for public holidays
Employees will not be entitled to payment for public holidays in the following circumstances:
- In the case of part-timers, they don’t work 40 hours in the previous 5 weeks.
- The employee is absent for more than 52 weeks due to an occupational illness or injury.
- The employee is absent for more than 26 weeks by reason of non-occupational illness or injury.
- A period of lay-off that exceeds 13 weeks.
- An absence by reason of strike.
- Where the employee is on health & safety leave.
Accrual of public holiday entitlements
All full-time employees are entitled to remuneration for the public holiday or substituted Church holiday, irrespective of their length of service.
Part-time employees are entitled to remuneration for the public holiday or substituted Church holiday where they have worked at least 40 hours in the five weeks preceding the holiday.
An employee will begin to accrue public holiday entitlements from the moment they commence working for their employer. It is not acceptable to exclude employees within their probationary period. An employee will also continue to accrue public holiday entitlements during the following periods of leave:
- Maternity Leave and Additional Maternity Leave.
- Adoptive Leave and Additional Adoptive Leave.
- Parental Leave.
- Force Majeure Leave.
- The first 13 weeks of carer’s leave.
- Annual Leave.
- Time spent on jury service.
- The first 13 weeks of any absence authorized by the employer (e.g. career break).
- The first 13 weeks of any period of temporary layoff.
Non-accrual of public holiday entitlements
An employee will not receive public holiday entitlements where:
- In the case of part-time employees, they haven’t worked at least 40 hours in the five weeks preceding the holiday.
- The employee has been absent from work for more than 52 weeks due to an occupational illness or injury.
- The employee has been absent from work for more than 26 weeks due to a non-occupational illness or injury.
- The employee has been absent from work by reason of temporary lay-off for more than 13 weeks.
- The employee has been absent by reason of strike action.
- The employee is on any period of health & safety leave.
Where employment ceases during the week ending on the day before a public or substituted Church holiday and at least 40 hours have been worked in the preceding 4 weeks leading up to the public holiday, a normal day’s pay is payable by the business with whom the employee was employed the week prior to the public holiday.
Public/Church holiday remuneration
The manner in which public or Church holidays are remunerated is determined by the employer and can be satisfied through one of four methods:
- A paid day off on the relevant holiday.
- A paid day off within one month.
- An extra day’s annual leave.
- An extra day’s pay.
Employees who work on public holidays are entitled to be paid at their basic rate for any hours worked (unless their terms and conditions provide for a higher rate of pay) as well as benefiting from the public holiday by way of one of the methods outlined above
While you may exclude overtime when calculating an employee’s remuneration entitlements, you must, as an employer, take into account and include any regular bonus or allowance that does not vary in relation to work done.
Payment for public/Church holidays is dependent on individual employment status. An employer may choose between any of the four methods outlined above. You will typically either provide an additional day’s pay or a paid day off. The next section will explain how such payments are calculated.
Variable hour, fixed-rate & salaried employees
If the public/Church holiday falls on a day the employee has actually worked, or would normally have worked, then the employee is entitled to such payment that is equivalent to the hours your employee worked (excluding overtime) on his/her last working day before the holiday.
If the public/Church holiday falls on a day the employee that the employee did not work, and would not normally have worked, then the employee is entitled to such payment that is equivalent to the one-fifth of the hours they worked (excluding overtime) on his/her last working week before the holiday.
Piece rate, commission-based employees
If the public/Church holiday falls on a day the employee has actually worked, or would normally have worked, then the employee is entitled to such payment that is equivalent to the average daily rate of pay (excluding overtime) that the employee received in the thirteen-week period ending before the holiday.
If the public/Church holiday falls on a day the employee didn’t work and the employee wouldn’t normally work on that day, then they are entitled to remuneration equivalent to one-fifth of their average weekly pay over the thirteen-week period prior to the public/Church holiday.
As you can see, depending on the make-up of your workforce, annual leave is more complicated than simply providing employees with four weeks’ paid annual leave every year.
Your employees are your greatest asset but on the other hand, they represent a business risk. When properly communicated, a well-drafted annual leave policy will allow you to effectively manage your workforce, optimize productivity and minimize the risk of handling employee disputes surrounding annual leave entitlements.
Don’t expose your business to avoidable annual leave risks. Put a clear annual leave policy in place and communicate it clearly to your employees.
Speak to one of the Peninsula expert advisers now on 1890 252 923