Holiday - use it or lose it

The Working Time Regulations 1998 (the Regulations) provide that generally, an employee cannot be required to work more than 48 hours per week on average. An employee can choose to work more by opting out of 48-hour week. In addition to setting out the amount of time that employees can be required to work, the Regulations also deal with the issue of holiday.

Basically, the Regulations provide that an employee should use any contractual holiday entitlement in the current holiday year. If such holiday is not taken in the current holiday year, the holiday entitlement is lost. This is known as the 'use it or lose it' provisions.  Many employment contracts contain these provisions.

However, a recent Court of Justice of the European Union (CJEU) case has cast doubt on the 'use it or lose it' provisions. In the case, the CJEU held that an employee does not automatically lose their accrued right to paid annual leave because they failed to ask for it i.e. if an employee does not ask for their holiday entitlement, their entitlement to it will still accrue.

The CJEU held that the holiday entitlement should not automatically be lost unless the employer has diligently brought it to the employee's attention that the holiday entitlement will be lost. It will be up to the employer to show that they have taken steps to bring this point to the attention of their employees.

Employers do not have to require that employees take their holiday entitlement, but must tell that employees in good time about the right.

The question as to what amounts to 'diligence' is important for employers to consider. Simply including the 'use it or lose it' provision in a written policy or the employment contract will probably not be sufficient to ensure that the employer can be said to have 'diligently' taken steps.

Employers should therefore consider issuing reminders well before the end of a holiday year to encourage their employees to take their holiday entitlement. The employer should particularly inform their employees that any unused holiday entitlement will be lost, otherwise any untaken holiday entitlement may be carried over indefinitely.

To discuss this or any employment related issue, contact us.