Is an undefined holiday allowance legal in the UK?
November 14, 2011 4:27 AM   Subscribe

My boss wants to change my holiday allowance. Ignoring how good or bad a deal this is, is it actually legal? Does it have tax implications? [UK specific]

As a lowly drone in my company, I'd managed to build myself up to 25 days holiday a year (exc public holidays) and I had a 5 day roll over from last year. This year it looks like I'll have 7 days rolling over to next year.

Seeing this, my boss wants to change my holiday allowance to "take as much holiday as you want, as long as everything gets done".

Knowing me, my employer, and our contracts, this strikes me as a very, very bad idea, so I'm going to refuse to go along with it.

My questions for the hivemind are these...
1) Under UK employment law, is this actually legal? Can you have a holiday allowance that is (in theory) anywhere between 0 and 365?
2) A friend has implied that this would (potentially) become a benefit in kind, and open me up to all sorts of problems with the Inland Revenue. Can anyone give me any pointers?

I know none of you are my accountant, solicitor or tax advisor, but any thoughts or nudges in the right direction would be appreciated.
posted by sodium lights the horizon to Work & Money (12 answers total)
1) Under UK employment law, is this actually legal? Can you have a holiday allowance that is (in theory) anywhere between 0 and 365?

Assuming you're working full-time, the legal minimum is 28 days (usually allocated as 20 days + 8 bank holidays).
posted by EndsOfInvention at 4:42 AM on November 14, 2011 [1 favorite]

Your employer may not be trying to do anything nefarious - they may just be trying to imitate US companies (most famously IBM) who have "unlimited vacation" policies.
These policies are very senior-management friendly because employees on them tend to take less vacation than the norm...and employees like them because of the flexibility.
posted by Wylla at 4:48 AM on November 14, 2011

There would have to be a minimum allowance of 28 days (which may include bank holidays). So you would have been entitled to 19 days this year, assuming a 5 day week. But this probably wouldn't need to be explicit in your contract, because it's a legal entitlement.

I'm pretty sure there's no upper limit on time off. You employer is paying you a salary, and that salary is taxed according to a formula that doesn't involve holiday allowance.

There can be tax issues if the holiday is a' benefit in kind', but that usually means that the extra holiday is given as a specific incentive for you going something to benefit your employer. An example might be a reward for sales, or meeting a certain production target. Merely taking time off because there's nothing for you to do isn't quite the same thing.

Assuming that this extra 'holiday' is really just time when you're not busy and are effectively 'on call' if your employer needs you, I'm fairly confident that there's no tax issue. I work from home for my employer and can take pretty much any time off I want, within reason. I've never been made aware of any taxation issues.

You employer probably already has all of those advisors, and should be able to check with them if you express your concern.
posted by le morte de bea arthur at 4:49 AM on November 14, 2011

The link provided above also says that there is no legal maximum, as for your second question, do you have an HR dept that you could check with? If not, I would search the site above for definitive wording, if there isn't any, there are contact details on that site so you could ask someone there directly. Benefits are either taxed monthly through NI tax and your show in your P60 at the end of the year, or taxed annually through a p11d, also sent at the end of the tax year. The p11d can hit you with a big tax bill in April, but you can instruct HMRC to deduct this monthly in your payslips.
posted by ellieBOA at 4:51 AM on November 14, 2011

This implies that there will be no roll-over days, meaning if you leave the firm you might not be paid for those days, or if the rules are changed in the future, you could lose days.
posted by blue_beetle at 5:27 AM on November 14, 2011

Can you have a holiday allowance that is (in theory) anywhere between 0 and 365?

No. There is a legal minimum but there is no legal maximum. You are entitled to at least 28 days inc public holidays.

It seems your company allows you to roll over unused holiday time into the next year (they're not required to do that. Most companies have a use it or lose it policy). When you leave the job they're required to pay you for any unused vacation days you have left. If you continue to roll over an ever increasing number of days they could be facing a hefty bill if you choose to leave. They may also be concerned that your rollover days could mean eventually you're entitled to more days off than will allow you to get all the work done.

Of course if their concern is the rollover days and you refuse the offer of take as much as you like so long as everything gets done, they may counter with 'use em or lose em'.
posted by missmagenta at 5:51 AM on November 14, 2011

Being cynical, I'd say your boss is doing this because it is to the firm's advantage, not yours. I'd accept only if there is no rollover and a buy back of all untaken leave at the end of each year.

Note that in the event of resigning or redundancy, untaken leave enters into various calculations. I'm not sure this proposal is even legal under UK law as IMHO the leave entitlement must be explicit; "as long as everything gets done" is far too vague and is unlikely to be how it would be written down in your employment contract.

Of course a good employment lawyer might choose to construe this agreement as you are entitled to full pay and work is optional.
posted by epo at 6:15 AM on November 14, 2011

Given your concern about motivation, I think you'd do better to counter with an offer that you'll use up your rollover days as soon as practically possible, and agree a limit (e.g. none, or a few days maximum) on future rollovers. Your boss should really have a policy in place for unused holiday, anyway, because this will come up again and again.

If you do decide to go ahead with some kind of unlimited holiday allowance, I think you need to get something clear in writing stating (a) that there's a minimum that corresponds to your current holiday allowance (25 days + bank holidays), (b) what the deal is regarding 'rollover' days, (c) what the deal is in terms of pay for unused holiday if you leave the job (voluntarily or otherwise), (d) what expectations there are in terms of giving notice for taking holiday, (e) what expectations there are about your availability (i.e. are you expected to be 'on call' during these times.

Given that list of concerns (and I expect there are more), you'd probably do better to stick with a more traditional holiday structure, particularly if you have reason to suspect that your boss may be setting you up in some way.
posted by le morte de bea arthur at 6:51 AM on November 14, 2011

This policy is great if your firms culture is such that you actually could take more than the statutory minimum. If it isn't then this might not be in your favor.

We use this policy and most of us have taken at least 6 weeks this year, and this is in the states where 3-4 weeks is about the most people get off. It actually causes problems for my wife and I as she only gets 4 weeks of hols, and has to actually pay for one of them.

You should however confirm how they will deal with accrued holiday, especially stuff you've banked in prior years.
posted by JPD at 6:52 AM on November 14, 2011

Have you asked your boss why s/he wants to make this change? This might give you a sense of whether it's simply something that's easier for accounting purposes or if it's a nefarious plot designed to do something...nefarious.
posted by lulu68 at 7:21 AM on November 14, 2011

I am surprised no-one has mentioned custom and practice, basically if the rollover holidays is established practice then it is effectively a part of your contract. Your employer cannot change this unless you argee to it.

The have as many holidays as it takes to get the job done thing seems likely to go beyond this and potentially conflict with EU and thus UK law.

Don't agree to either of these changes if they are not in your best interest.
posted by biffa at 9:31 AM on November 14, 2011

Thanks all.

There's no way in hell I'm accepting the proposal - we're a small enough firm that there could never be a good day to take a holiday. My objective for asking the question was for legal / taxation purposes as additional reasons to shoot the idea down.

Reading through the various comments, it looks like it's perfectly legal (as long as I get my legal minimum) and there's probably no taxation issues.

Seeing as my current allowance is 25 days + bank holidays, it looks like my boss is trying to gamble those 5 days against workload...

As for why it's happening... A perfect storm of issues appeared earlier in the year that meant I was the only one who could work on a specific project, and so (accidentally) took no holiday between Feb and November. His proposal negated my need to take 20 days holiday in 2 months but also demonstrated to me why his proposal was a very bad idea. In the interests of balance, he pitched it as "I trust you not to abuse [the proposal] and I never look at how much holiday you've used anyway"
posted by sodium lights the horizon at 9:59 AM on November 14, 2011

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