"Paying back" holiday

Q: Our employer wants to change our leave year from July-June to January-December, and all staff have been told that from 1 January they cannot take any leave until it has been accrued. Those who have already taken leave not yet accrued must work or pay the time back. Is this legal?

A: Unlike a change to the number of days' annual leave, a change to the holiday year may not count as a contractual change. Even if it does, as a last resort the employer could end the existing contracts and replace them with new ones containing the new rules; a tribunal might well find that it had acted reasonably in doing so, as long as it had given notice and could show that it had regularly been losing money under the old system.

However, the rules cannot be changed retrospectively. If everyone who "owes holiday" to the employer refuses to pay it back or work the additional time, it is hard to see how the employer could enforce this rule. Deductions of the money from workers' wages could be challenged as unlawful, since the workers were entitled to take the holiday (and be paid for it) at the time they took it. And dismissals would be very unlikely to be reasonable - people cannot be dismissed because they did not comply with a term of their contract that did not exist at the time.