Token payments in lieu of holiday not permitted says ET

A recent decision of the Employment Tribunal has confirmed that payments in lieu of accrued and untaken statutory holiday upon termination of employment must reflect normal pay: token payments are not allowed.

The Facts

In the recent case of Podlasiak v Edinburgh Woollen Mill Limited ET/2701291/2013, Ms Podlasiak worked for Edinburgh Woollen Mill under a zero hours contract. Upon termination of this contract, Ms Podlasiak had 3 days of accrued and untaken holiday. Had Ms Podlasiak taken this holiday during her employment, she would have been paid the net sum of £176.

It is trite law that upon termination of employment, workers are entitled to be paid in lieu of accrued and untaken holiday. In this instance, Edinburgh Woollen Mill sought to rely on a clause in Ms Podlasiak’s contract which provided that upon termination of her employment, Ms Podlasiak would be entitled to the sum of £1 in lieu of any untaken holiday. Ms Podlasiak claimed that she should have received the sum of £176.

The Decision

The Tribunal found in favour of Ms Podlasiak and ordered Edinburgh Woollen Mill to pay her the sum of £176.

The Judge concluded that payment in lieu of holiday has to be calculated to reflect the pay that the individual would have received had they taken the leave in respect of which the payment in lieu is made. It therefore held that the term in Ms Podlasiak’s contract providing for a token payment of £1 was impermissible.

The Consequences

The outcome of this case suggests that any clause in a contract which provides for a token payment in lieu will be rendered unlawful.

However, this is only a first instance decision and so it is not binding on other Tribunals. It is therefore possible that a different Tribunal will take a different view and if Edinburgh Woollen Mill appeals against the decision then it might be overturned by the Employment Appeal Tribunal at a later date.

For now though, we suggest that it is a sensible time to review the holiday clauses in your contracts of employment. If these include provision for no or token payments in lieu of holiday, contact one of our employment solicitors who can provide practical advice about what to do.