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)

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:

https://www.gov.uk/national-minimum-wage-rates

Holidays and Holiday Pay

Workers are entitled to a minimum of 5.6 weeks paid annual leave, including public and bank holidays. This works out to 28 days for someone who works five days a week. The entitlement cannot be replaced by payment in lieu and employers can contract to more than the statutory minimum but no less.

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. The employer can restrict the worker from taking 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 weeks leave the employer must notify them of the refusal one week in advance.

Guaranteed overtime is considered to form part of normal working hours and should be included in the calculation of holiday pay. A recent EAT ruling has confirmed that non-guaranteed overtime should also be included in the calculation of holiday pay.

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