• Employers can designate as statutory holiday periods of time where the employee is not normally required to work, such as field-breaks spent onshore by offshore workers or school holidays for teachers.

In contrast, days which are part of the seven day weekly cycle but which are not normally worked (eg weekends) cannot be designated as holiday. (Russell v Transocean International Resources, Ct of Session.)

The decision is not strictly binding on the English EAT but will be highly persuasive.

  • Employers may not have to top up PHI benefits where employees on PHI take statutory holiday.

Employees who take holiday while on PHI are only entitled to pay calculated using their PHI payment level (often 50% of salary) and not their previous, full salary, according to a recent tribunal decision. It reasoned that the employee had had her contract permanently varied to the new lower salary level provided by the PHI payments. The issue of whether PHI payments made by the insurer can properly be set off against the employer's obligation to pay holiday pay was not argued.

The tribunal also agreed with the ruling in Kahn that employers can defeat unlawful deduction claims for prior years' untaken holiday by making a payment in lieu of holiday entitlement in the year of termination, and that untaken holiday is lost at the end of the year even if the employee was sick throughout and unaware of her right to take holiday. As set out in our e-bulletin on Kahn, there are arguments to the contrary and it is hoped that a higher tribunal will be asked to give guidance on these issues soon. (Souter v Royal College of Nursing Scotland, ET)