Is it true that employees are entitled to paid holiday as soon as they start a new job? If so, how can abuse of this entitlement be prevented?

The Working Time Regulations 1998 (WTR) define entitlement to statutory annual leave. The right to holiday leave applies to "workers", not just to "employees", and includes agency workers and work experience trainees.

A worker's statutory annual leave entitlement, including paid customary and bank holidays, is 5.6 weeks (from holiday years starting April 2009 or later), to be taken in the worker's holiday year. A worker's holiday year is that defined in the employment contract. If it is not defined, it is the year period starting on each 1 October if the worker was in the employment on 1 October 1998, or the year period starting on the first day of the worker's employment, and on the anniversary in each subsequent year, if the employment started after 1 October 1998.

Many workers have a contractual holiday entitlement that exceeds the statutory figure, even when paid customary or bank holidays are included. It is quite legitimate for a worker's employment contract or negotiated agreement to define rules for booking holidays and restricting the rate at which it may be taken, even to the extent of prohibiting the taking of holiday at certain times of the year.

Employers who provide their workers with the statutory minimum holiday entitlement are not required by any statutory provision to restrict the taking of that entitlement. If an employee were to give the statutory notice period to take two weeks' paid holiday shortly after starting a new job, the employer could grant the request, even though that would mean that the worker has taken over a third of the annual entitlement without having "accrued" it by virtue of length of service.

It is important to understand that statutory holiday entitlement, as defined in the WTR, is not accrued. The annual entitlement is 5.6 weeks in the employee's holiday year; the rate at which it is taken is for the employer to decide.

Allowing workers to take a large part of their holiday entitlement early in the holiday year is open to abuse. The worker might not return to work after taking the paid leave and the employer may be unable to recover any of the overpaid holiday pay. To limit such abuse, section 15A of the WTR provides a mechanism that allows employers, if they so wish, to restrict the rate at which their worker's holiday leave is taken in their first year of employment.

The process is described as "accrual" but it is only accrual for the purpose of limiting the rate at which annual entitlement may be taken. The accrual rate is 1/12th of the worker's annual entitlement, starting on the first day of employment and on each monthly anniversary thereafter.

For example, a 5-day worker who starts a new job on 7 October and who has an annual holiday entitlement of 28 days accrues 2½ days on 7 October (i.e. 28 ÷ 12 = 2.33, rounded up). The employer may limit the holiday taken up to 6 November to 2½ days. On 7 November, the accrual is 5 days (i.e. 28 ÷ 12 × 2 = 4.67, rounded up). The total holiday taken in the two months to 7 December may be limited to 5 days. On 7 December, the accrual increases to 7 days (i.e. 28 ÷ 12 × 3), allowing the employer to restrict the paid holiday taken in the first three months of employment, to 6 January, to 7 days.

The same process continues throughout the first year of employment. The result is that, if this mechanism is used, the employer is able to restrict the rate at which a worker takes paid holiday over the period of one year and thereby minimise the likelihood of abuse.

...UK Payroll News - Latest

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