Yes. Under the Holidays Act 2003 all employees are entitled to annual holidays either on the anniversary of their employment commencement date, or on the date of the beginning of their employer's customary seasonal closedown.

An employee's time on parental leave is included as continuous service and the taking of parental leave does not affect entitlement to annual leave; the employee will still be entitled to a minimum of four weeks of annual holidays. However, the payments for the annual holidays will be affected by the parental leave.

Normally payments for annual holidays would be based on the greater of:

• Average weekly earnings for the 12 months immediately before the end of the last pay period before the annual holiday is taken; or

• The employee's ordinary weekly pay as at the beginning of the annual holiday (the amount of pay the employee receives under his/her employment agreement for an ordinary working week).
  
  However, under the Parental Leave and Employment Protection Act 1987, if an employee becomes entitled to annual holidays while they are on parental leave or in the 12 months following any parental leave, the calculation changes. The payment amount will then be determined by calculating only the employee's average weekly earnings for the 12 months immediately before the end of the last pay period before the annual holidays are taken.

The calculation would not be compared to the ordinary weekly pay as would normally occur. This means that if the employee takes their annual holidays soon after coming back from parental leave there is a high likelihood that the payment for annual leave may be a smaller amount than if they took their annual leave at another time.

Annual leave is always calculated at the time the employee takes their leave.
 

It is important for both employer and employee to discuss leave plans as early as possible. Suggested factors to consider:

• Ensure all parties are fully informed of their entitlements and obligations to each other; including where to source further information or assistance
• Ensure you have a discussion about how to use any current leave entitlement; including current annual leave balances, when the anniversary date is, and the effect of parental leave legislation on entitlement
• In some cases, it may be more advantageous for the employee to take the leave before they go on parental leave

For information on annual holidays

For information on parental leave for employees