Holiday Payments on Termination Must Reflect Normal Pay

In Podlasiak v Edinburgh Woollen Mill Ltd ET/270129/13, an Employment Tribunal held that a payment in lieu of untaken holiday made on termination of employment must be equivalent to the pay the worker would have received had they taken the holiday during employment.

Ms Podlasiak was employed by Edinburgh Woollen Mill Ltd under a contract which provided that on termination of her employment she would be paid £1 in lieu of untaken holiday.  When her employment terminated, she had 3 days' untaken holiday and the company made her a payment of £1 in accordance with the contract.  Ms Podlasiak claimed that she should have been paid £176 which is the amount she would have been paid if she had taken the holiday during her employment.  The Tribunal upheld her claim on the basis that this reflected current European law which required that on termination of employment, employees should be in the same financial position they would have been in had they taken their holiday during their employment.

This is a first instance decision and therefore not binding on other Tribunals.  However, in the absence of other clear authority, employers would be well advised to calculate holiday payments on termination based on the amount the employee would have received, had they taken the holiday during their employment.