Token Payment in Lieu of Accrued Holidays Ruled Unlawful

Louise Elster
19th Sep 2013

Yesterday, an Employment Tribunal ruled that a clause in a contract of employment, providing that an employee would only receive £1 in respect of accrued holiday pay on termination of employment, was unlawful and therefore unenforceable.

Employment contract


The UK Working Time Regulations stated that an employer and employee can come to an agreement in writing, known as a ‘relevant agreement’, as to how much accrued holiday pay is payable upon termination of employment. Therefore, it is not uncommon for employment contracts to provide that a token payment, such as £1, will be payable when the employee has been dismissed for gross misconduct or fails to work out their contractual notice period.


The Employment Tribunal in this case decided that the UK regulation permitting this type of agreement was not compatible with the European Working Time Directive.

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