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Minimum Wage, Holiday and Holday Pay

Employment Contract Key Terms: Wages, Minimum Wage, Holidays & Holiday Pay

What you include in your employment contract will be determined according to legal and best practice requirements and the nature of your business. Certain rights are imposed by statute regardless of the provisions of your employment contract and other terms are implied by law unless you specifically agree otherwise. Other than the above, you and the employee are largely at liberty to come to your own agreement. Key terms will include:

National Minimum Wage (NMW) and National Living Wage

The employment contract should address the amount, payment intervals and payment methods and whether any bonuses and commission are contractual entitlements or awarded at your discretion.

Please refer to the government website for current rates of NMW and the National Living Wage: https://www.gov.uk/national-minimum-wage-rates.

Employees must be at least:

• school leaving age to receive the National Minimum Wage; and

• aged 23 to receive the National Living Wage. For workers aged 22 and under, the minimum wage still applies.

Holidays and Holiday Pay

Workers are entitled to a minimum of 5.6 weeks’ paid annual leave, including public and bank holidays. This equates to 28 days of annual leave for someone who works five days a week. Employers can offer more annual leave than the statutory minimum but not less. Holiday entitlement cannot be replaced by payment in lieu of leave, apart from when the employee is leaving employment and has accrued and unused annual leave.

Holiday entitlement accrues from the day that an employee starts work although, during the first year of employment, an employee can be limited to taking the holiday that he/she has actually accrued. The worker must give minimum notice of twice the leave to be taken so, for example, where an employee wishes to take one week off, they must give two weeks’ notice. An employer can refuse a worker’s request to take leave on particular days, however they must give notice which is at least as long as the holiday requested, so for example where the employee has requested one week’s leave the employer must notify them of the refusal one week in advance.

Guaranteed and non-guaranteed overtime should be considered in the calculation of holiday pay, along with commission.

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