The Organisation of Working Time Act 1997 states that the holiday and public holiday provisions in the Act apply to all employees (whether full-time, part-time, fixed-term or casual) engaged under a contract of employment. There is no qualifying period for holidays and all employees, regardless of status, service or age, begin to accrue holiday entitlements from the day they commence employment. When calculating holiday entitlements, all time worked qualifies for holiday entitlement including overtime hours worked.
An employee’s statutory annual leave entitlement should be calculated by one of the following methods, depending on the number of hours worked:-
- 4 working weeks in a leave year in which the employee works at least 1,365 hours (unless it is a leave year in which he, or she, changes employment)
- 1/3rd of a working week for each month in a leave year in which the employee works at least 117 hours
- 8% of the hours worked by an employee in a leave year (but subject to a maximum of 4 working weeks)
References to a ‘working week’ above, refer to the number of days that the employee concerned usually works in a week.
If more than one of these provisions apply to an employee and the results are not the same, the employee is entitled to whichever result is the more advantageous for him.
An employee who works for 8 or more months in a leave year is entitled to 2 unbroken week’s annual leave.
While an employee is entitled to a minimum of 4 working weeks holidays in a leave year, there is nothing to prevent an employer from providing an employee with an annual leave entitlement in excess of 4 working weeks, but this is purely a matter between the employer and the employee.
An employee is regarded as having worked on a day of annual leave or on a public holiday, the hours he would have worked on that day, if it had been a normal workday. When calculating hours worked, credit must be given for the normal hours, which would have been worked on a day of annual leave or a public holiday, if that day had been a normal working day.
A part-time employee’s annual leave entitlement is calculated in a similar manner to a full-time employee based on whichever of the 3 methods is appropriate, depending on the number of hours worked by the part-time employee. This provision has not been altered by the terms of the Protection of Employees (Part-Time Work) Act 2001.
In practice, this means that an employee who works regular part-time hours e.g. 7 hours per day, 3 days a week, will be entitled to a minimum of 12 days (3 days x 4 weeks) annual leave per year under the Act. On first glance it may appear that the holiday entitlement should be calculated as 8% of the hours worked, as this employee will not exceed 117 hours per month or 1,365 hours per year, but the 8% calculation is subject to a maximum of 4 working weeks per year. If the employee was to commence or leave mid-year, the annual leave calculation may need to be calculated based on 8% of the hours worked in the year of commencement or cessation.
Where an employee works irregular hours, annual leave is most commonly calculated using 8% of hours worked, subject to a maximum of 4 working weeks for that employee.
Many employers have been forced to reduce their employees’ working hours in recent years by putting them on a 3 or 4 day week, which may affect their annual leave entitlement. Where an employee’s hours of work have been reduced he will accrue annual leave based on actual hours worked. Where an employee is put on temporary short-time or temporary lay-off, his holiday entitlements are calculated based on the temporary working hours. References in the Act to a working week mean the number of days that the employee concerned normally works in a week. Where an employee’s working week changes mid-year, the annual leave calculations should be split based on the changes in working hours during the year.
Calculating Holiday Pay
The Organisation of Working Time (Determination of Pay for Holidays) Regulations 1997 (S.I. No. 475/1997) sets out the methods for calculating:
- The normal daily/weekly rate of an employee’s pay for holiday pay, and
- The appropriate daily rate of an employee’s pay for public holidays.
The method of calculating the normal weekly rate of pay for holiday pay is as follows:-
- If the employee’s pay is calculated purely on the basis of a rate per hour, per day, etc, or on a fixed rate, or salary, or any other rate that does not vary according to the work done by him, the normal weekly rate shall be the sum (including any regular bonus or allowances, but excluding pay for overtime) that is paid to the employee in respect of the normal weekly working hours last worked by him before annual leave commences (or employment ceases). In other words, an employee is entitled to an average week’s wages, excluding pay for overtime.
- If the employee’s pay is not calculated as above, the normal weekly rate of pay shall be the average weekly pay (excluding pay for overtime) calculated over the period of:-
- 13 weeks ending immediately before the annual leave commences (or employment ceases), or
- If no time was worked by the employee during that period, over the period of 13 weeks ending on the day that was last worked by an employee, before annual leave commences (or employment ceases)
This rate of calculation applies where employees (e.g sales reps) are paid a basic salary and a variable commission; thus an average of the commission paid in the previous 13 weeks is paid as part of the holiday pay.
It is illegal to pay an employee in lieu of any part of his statutory holiday entitlements i.e. 4 weeks’ holidays, unless the employment has ceased. If an employee was entitled to 5 weeks’ holidays and had taken his statutory entitlement of 4 weeks, that employee could accept payment in lieu of his additional holiday entitlement of 1 week. All employees must take their statutory entitlement in each leave year and holiday pay must be paid in advance of commencement of leave.
It should be noted that where an employee receives holiday pay, he must be granted a PRSI contribution week in respect of each week of holiday pay received. If this does not happen, the employee may suffer a loss of Department of Social Protection (DSP) benefits due to having an incorrect PRSI record.
Sickness
If an employee is sick during his holidays and can produce a medical certificate, the sick day or days are not included in the annual leave. In other words, the employee is entitled to additional days leave to compensate him when he becomes sick when absent on holiday leave.
Since 1st August 2015, the Organisation of Working Time Act 1997 has been amended, to provide that any day of absence on certified sick leave is considered to be time spent working for the purpose of accruing statutory annual leave. This change brings the annual leave provisions of the Organisation of Working Time Act 1997 into line with the annual leave provisions of the EU Working Time Directive as interpreted by the Court of Justice of the European Union (CJEU) in the Schultz-Hoff and Stringer line of cases.
This amendment brings employees in the private sector in line with public sector employees who already accrue annual leave while absent on certified sick leave as public service bodies have to abide by decisions of the CJEU under the principle of direct effect.
This change primarily affects those employees who are absent on long term sick leave, as any employee who works 1,365 hours in a leave year is automatically entitled to his statutory entitlement of 4 working weeks.
Generally, annual leave must be granted within the leave year to which it relates, or carried over and taken within 6 months of the following leave year, with the consent of the employee.
Since 1st August 2015, this carry over period has been extended from 6 months to 15 months if an employee is unable to avail of his annual leave during the leave year or the normal 6 month carry over period due to illness. If he does not get the opportunity to take the annual leave within 15 months following the end of the leave year in which it was accrued, he will subsequently lose that entitlement as the maximum carry over period is 15 months.
Where a cessation of employment occurs within 15 months following the end of a leave year, and an employee did not get to avail of his statutory annual leave due to certified illness, that employee must be paid in lieu of any statutory annual leave accruing in that leave year and up to a maximum of 15 months after the end of that leave year.
For example, an employer's annual leave year runs from January to December. An employee is absent on long term certified sick leave from January 2016 until he ceases his employment in February 2018. As the employment ceases within 15 months following the end of the 2016 leave year, the employee must be paid in lieu of his statutory annual leave which accrued from January 2016 to his leave date of February 2018.
If the employment ceased in April 2018, the employee would be entitled to be compensated in respect of his statutory annual leave accruing from January 2017 up to April 2018, but he would lose his entitlement to the annual leave which accrued in 2016.
Timing of Annual Leave
The Act provides that the employer decides when the employee can take annual leave. However, the employer must take into account:-
- The need for the employee to reconcile work and family responsibilities e.g. school holidays, partner’s holidays etc
- The opportunities for rest and recreation available to the employee.
The employer must consult with the employee, or his trade union, at least one month before leave is requested, to aid work schedules, organising cover etc. The holidays must be taken with the leave year, or if the employee consents, within six months of the following year. It is the employer’s responsibility to ensure that every employee takes their full statutory annual leave entitlement each year and the employer can therefore insist on an employee taking his statutory leave entitlement in a year.
If you have any queries in relation to the above or indeed are interested in outsourcing the payroll function of your business contact us on 021 4641400 or email info@quintas.ie
