What payment should be made for a bank holiday that falls during paid statutory leave?

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A bank holiday may occur while an employee is away on maternity, paternity or adoption leave. What action, if any, the employer takes with regard to payment for the bank holiday is a contractual matter.

In the case of salaried staff, for example, where an employee's salary is paid as normal when there are one or more bank holidays during a month, the contract may say very little about payment arrangements. In contrast, the contract for a weekly, hourly-paid employee, particularly if shifts are paid, may be very specific about how payment for a bank holiday is calculated. Further complications may arise if the employee works part-time, does not normally work on the bank holiday but receives a pro-rata payment in order to avoid discrimination with full-timers. Where the contract provides for payment for bank holidays, the amount paid will almost invariably be more than the proportionate payment for a day of maternity, paternity or adoption leave.

It is important to recognise that SMP, SPP and SAP are governed by statutory rules. In contrast, whether or not an employee is entitled to be paid for a bank holiday is a contractual matter. However, if payment is made for a bank holiday and that day of holiday is to count against the annual entitlement to statutory holiday pay, the rate at which payment is made must not be less than "a week's pay", as defined in legislation.

A number of statutory rules for SMP, SPP and SAP are relevant to an employee's procedures.

• Maternity and adoption leave are periods of up to 12 months. The maternity and adoption pay periods are periods of up to 9 months. These periods cannot be extended if any days during leave are treated or paid for as bank holidays.
  
  
• Paternity leave and the paternity pay period are periods of one or two weeks. They also cannot be extended if they include a bank holiday.
  
  
• Each maternity, paternity and adoption pay period is a period of seven days, each one following on from the previous one. For each of those seven-day periods, the employer must pay one week's SMP, SPP or SAP (at the appropriate statutory rate) and, having done so, may recover either 92% or 104½% of the payment, according to the employer's size.
  
  
• Any payments of remuneration*, contractual sick pay or contractual maternity, paternity or adoption pay that are made in respect of a statutory payment week satisfies the employer's liability to pay SMP, SPP or SAP, and vice versa. Note that this offsetting provision relates to each whole week of leave, not to particular days. If the employer pays, say, £100 in respect of a bank holiday during a payment week, the whole £100 may count towards the statutory payment due for the whole week. In reverse, the statutory payment for the week can count towards the whole of the contractual holiday pay.

Taking those factors into consideration, the options available to an employer in respect of bank holidays depend on what the employer is obliged to do under the contract. It may not be necessary to do anything, if there is no contractual obligation to pay for the bank holiday or if the statutory payment may be treated as meeting any contractual obligation.

Otherwise, if the employer is contractually obliged to pay for bank holidays on top of SMP, SPP and SAP, the contract may permit the employer

1. to provide a day in lieu of the bank holiday when the statutory leave period has ended and the employee is again receiving full wages, or
   
   
2. treat the bank holiday as such and either
   
   
   • make no additional payment for it, on the basis that the statutory payment offsets the contractual payment due, or
     
     
   • make an additional payment for it, according to defined contractual rules.

In the case of the second option,

• the statutory leave period cannot be extended - in effect a day of leave is lost as a result, but
  
  
• the employer may still recover 92% or 104½%, as appropriate, of the total amount of the statutory payment due for the week.

*Holiday pay is assumed to be "remuneration" for this purpose although the Regulations do not specifically say so.

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