Holiday pay, what you need to know

It’s that time of year again when holiday requests are flooding in. As an employer, it is important that you know what your employees are entitled to and that your holiday pay calculations are in line with the current requirements. You need to make sure that you are not underpaying or more importantly overpaying!

There are a number of important factors that you need to take into account when calculating holiday pay, such as overtime, working patterns, commission and work related travel.

amount of time allocated to employees for their holiday will normally be stated in their contract of employment. The current statutory minimum is 5.6 weeks.

Overtime: There are three types of overtime and its impact on holiday pay will differ depending on which type it is.

Guaranteed overtime- If you are obliged by contract to offer and pay over time, then it must be included in the holiday pay calculations.

Non-guaranteed overtime- This occurs when you are not obliged by contract to offer overtime but the employee is obligated to work it if it is offered. If non-guaranteed overtime is worked on a regular basis it should be included in the holiday pay calculations.

Voluntary overtime- Here you are able to offer the employee over time but you are under no contractual obligation to do so and they are likewise under no obligation to accept. If this is the case then it is not necessary to include voluntary overtime in holiday pay calculations.

Work patterns: It can sometimes be impossible to know where to start with holiday pay when an employee works different hours each week. Generally, an employee should be paid holiday based on their ordinary weekly wage and this should be based on the average pay received over the previous 12 weeks.

Commission: Quite simply commission should be taken into account when calculating holiday pay. The amount that employees get paid for their holiday must be based on both their basic pay and any commission they earn.

Work related travel: This means any travel in the course of their employment that is not part of their usual commute to and from their usual place of work. Where travelling time is included in the employee’s basic pay, it will need to be taken into account when calculating holiday pay.

If you are unsure about how to calculate holiday pay for your employees, close your spreadsheets, put that calculator away and get in touch – we will do it for you!

Speak soon.

Your HR Lawyer