There are no reported cases confirming how maternity leave affects holiday entitlement and it is an issue which currently causes much confusion. Until the position is clarified (and there is a case in the pipeline about holiday during sick leave which might shed some light on the issue by the end of this year), we advise the approach set out below.
We deal first with the position once the law has changed because, as you will see, it is the most straightforward.
Once the law on benefits during AML has changed
Once the law on benefits during AML has changed, the employee will be entitled to her full contractual holiday entitlement for the holiday year even if she is on maternity leave for some or all of it.
However, you should also check that the amount of holiday to which the employee is entitled under her contract of employment does not fall below the minimum statutory threshold under the Working Time Regulations. This is currently 4.8 weeks’ paid holiday each year (which is 24 days for someone working a 5-day-week) but will go up to 5.6 weeks (28 days for someone working a 5-day week) in April 2009. Do not assume that the minimum threshold will have been met, even if your company policy is relatively generous.
For example, suppose your company allows 25 days’ paid holiday each calendar year plus bank holidays for an employee working 5 days a week. If the employee is on maternity leave for a whole calendar year she cannot actually take any bank holidays that year (because she can’t be on maternity leave and holiday at the same time - see above) and so your company policy will end up entitling her to 25 days.
Whether or not she has time to take any of this holiday entitlement is another matter. An overall entitlement of 25 days will meet the current statutory minimum threshold of 24 days but will not meet the new minimum threshold of 28 days from April 2009. You may have paid the employee for some or all of the bank holidays which fell during her maternity leave but technically they would not count as holidays and the payment would not have extinguished her entitlement to 28 days’ holiday. You may therefore need to ‘top up’ her entitlement to a total of 28 days, although of course she may end up not being able to take all of this entitlement (see below).
Position under the current law
Under the current rules, you can probably make a pro-rata reduction of an employee’s contractual entitlement to reflect the proportion of the year that she is on AML. (Her statutory minimum holiday entitlement is not affected by AML). In practice, this will only make a difference if the employee’s contractual entitlement significantly exceeds the statutory entitlement.
The best way to approach the calculation is to take the amount of additional contractual holiday entitlement over and above the statutory minimum and pro-rate this additional amount. For the purposes of this calculation, you need to ignore bank holidays and focus only on the remaining additional contractual holiday entitlement.
For example, suppose that the employee is contractually entitled to 25 days’ holiday per calendar year plus bank holidays and is on AML for the first six months of this year. If you disregard bank holidays, the amount of additional contractual holiday which exceeds the current 24-day statutory minimum is just one day. If that is pro-rated to reflect the fact that she is on AML for the first half of the holiday year then her additional contractual entitlement is 0.5 days making a total contractual entitlement for this year of 24.5 days plus the bank holidays which occur after she returns.
Although most HR professionals currently do reduce an employee’s holiday entitlement to reflect the time during which the employee is on AML, as shown above, the number of days affected is often very small.
Once the law on benefits during AML has changed, this pro-rata approach will be inappropriate and the position will become more straightforward. Then, the practical difficulty is likely to be the issue of carrying forward holidays rather than the calculation of holiday entitlement (this is dealt with below).
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