The first is when the employer and employee cannot agree about the timing of annual holidays. The employer cannot unreasonably withhold consent to an employee’s request to take annual holidays at a particular time, but agreement may be difficult to obtain. For example, staff shortages may leave a business out of operation if all employees take annual leave at the same time. In this situation an employer is entitled to require some employees to take the annual leave at another time.
The second instance of where an employee may be forced to take annual holidays is when the employer has an annual closedown on a regular basis. For example, a company may close over the Christmas and New Year period. Employees of the company can be required to take their annual leave then.
In both instances the employer must give at least 14 days notice to the employee of their requirement to take holidays.
A question that is often asked is whether employers can pay out annual leave in lieu of employees taking their annual holidays. Whilst there has been no case on this issue, the Department of Labour has advised that the payment of annual holidays should only be made when the holidays are physically taken. Although the Holidays Act does not specifically prohibit such payment, the purpose of the Act is to “promote balance between work and other aspects of employees’ lives” and “provide the opportunity for rest and recreation”. Accordingly, annual holidays should be taken by the employee to ensure that the employee has a break from work. However, if an employment agreement entitles an employee to more annual holidays than required by the Holidays Act, the extra week/s can be paid out if the employee agrees.
Employers cannot include a “use it or lose it clause” in employment agreements with regard to annual holidays. Such a clause would mean that annual holidays would not accrue and if they were not taken; they would be lost. If this clause were included in an employment agreement, it would be deemed ineffective as it excludes, restricts and reduces the employee entitlements listed in the Holidays Act. In order to stop employees building up weeks and weeks of annual leave employers should make sure that employees take leave each year.
