Permitted work and holiday pay in lieu

Hi all

Just had a query regarding a client who is currently doing permitted work.
He’s been working for a year with earnings and hours below the permitted work limits.
He did not take any annual leave during this period.
He’s now been there a year and they are now offering a lump sum payment in lieu of the annual leave.
Client wants to know how this would be treated by ESA and if it will affect his permitted work.

We’re currently leaning towards it likely being averaged out across the year it accrued - so adding an additional amount to each week’s earnings. But we can’t find any guidance or regs that explicitly mention this scenario - as it isn’t holiday pay after work ends or compensation.

I’m hoping someone here has had a similar situation or can offer some insight into how ESA is likely to treat this lump sum.

It’s extremely unlikely there’s a rule for this -because what the employer is doing is not legal.

Statutory entitlement to holiday (the part time equivalent of 28 days a year - may be less if they deal with bank holidays differently) must be taken, and not paid in lieu.

If it’s wages then you’d be left arguing about whether it covered an identifiable period (and looking very carefully at whether the claimant is better off trying to apportion it over a long period - which could effect entitlement over multiple weeks). Whether an entirely unlawful payment counts as wages is another question.