How to avoid employee disputes in relation to holiday pay

29 May 2026

It might be that your holiday pay year has refreshed this April or you are seeing an increase in holiday requests for the summer.

No matter what, you need to be prepared for the risk of holiday pay disputes.

However, with a new year comes the risks of holiday pay disputes.

Our Head of Dispute Resolution and Employment, Amanda Hyam, explains how early preparation and understanding your obligations can help protect your business.

What are employers’ obligations for holiday pay and time off?

On 1 January 2024, changes to the Working Time Regulations were made, under which every worker is entitled to 5.6 weeks of paid annual leave and contractual holiday entitlement can be promised in individual contracts.

Of the 5.6 weeks, four weeks must be paid at the worker’s normal rate and the remaining 1.6 at the basic remuneration.

For irregular or part-year workers, the reforms allow paid statutory holiday calculated based on the hours they worked using the 12.07 per cent accrual method.

When dealing with holiday pay, employers should have clear policies in place to help reduce the risk of disputes.

They should clearly state if rolled-up holiday pay is used and this payment should be marked on payslips as an addition to a worker’s salary.

Company policies and employers should state if they have a use-it-or-lose-it policy in place for holiday days and offer regular reminders to employees of the deadline.

Some of the most common issues employers face around time off include:

• Conflicting annual leave requests
• Uncertainty around bank holiday dates
• Incorrect holiday pay, including overtime and commission
• Discrimination risks for other religious festivals
• Poor record keeping of leave and holiday pay calculations

The summer holidays are a busy period for booking time off and it can bring additional stress to employers and as a result, small errors can be made.

These mistakes can quickly escalate into disputes or even Employment Tribunal claims, so employers need to act fast and seek legal advice early on.

How can employers protect themselves from disputes?

Reducing holiday pay disputes can be as simple as updating contracts and policies on holiday pay calculations, bank holidays, overtime and how leave requests are prioritised during peak seasons.

Employers should communicate with employees on how to put in their leave requests in advance and inform them if their holiday request has not been accepted.

Setting a clear cut-off date and creating a first-come, first-served or rotational holiday process can help manage fairness during a busy time.

Documentation is also important to avoid disputes by maintaining accurate timesheets, overtime records, leave requests and payslips showing holiday pay.

It is important to comply with the current laws and policies on employee pay and be efficient in any corrections to reduce the risks of a series of deduction claims.

If you are unsure of how to create a legally compliant contract and handle discrimination allegations around the holidays, seeking legal advice is crucial.

Why does the right support matter?

Holiday pay disputes can be time-sensitive and costly if not handled correctly. They can also damage employee trust and confidence, not only for the individual involved in the dispute, but their peers if the situation is handled poorly.

Our expert team can review and update your contracts or policies to ensure your pay practices are compliant and minimise the risk of tribunal claims.

For tailored support on your holiday pay process or managing a dispute, contact our team.