Holiday Entitlement – a thing of the past?

While most employers are grappling with the calculation of holiday pay following the recent decision of the European Court of Justice in Lock v British Gas and the appeals in the EAT against our domestic decisions on holiday pay, the Telegraph has reported here and the Guardian here that Richard Branson has announced a move away from a formal holiday policy for employees in his personal staff. Employees will be able to determine their own holidays and take time off when they want without prior warning. They will not be bound by maximum holiday entitlements and will not be required to keep any log of holidays taken.

The flipside of this flexibility is that employees are expected to keep up to date with their work at all times and to ensure that the business does not suffer as a result of their absence. The move away from a formal holiday policy is intended to place the emphasis on how much employees get done rather than how much time they spend doing it.

At a time when many employers are struggling to work out how they should be calculating holiday pay a move away from formal policies and complex calculations may be attractive.  Such a policy will also be attractive to many employees and assist an employer in recruiting and retaining talent.  There are however some obvious downsides.

What about employees who are not performing satisfactorily? An unmeasured approach to holiday and attendance in the office will surely make it more difficult to manage such employees.

At the other end of the spectrum, will committed employees take enough holiday? If the employment relationship breaks down, how will the employer be able to demonstrate that the employee has been entitled to holiday in line with statutory requirements? If no record is kept of the employee’s absences then the employer will surely be exposed to claims by employees that they have not been able to take their minimum entitlement to 28 days holiday.

Taking a move which we have seen requested by US companies operating businesses in the UK, it will be interesting to see how Richard Branson approaches these difficulties and whether or not the policy is later followed in his other businesses.