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Holiday Pay – How to get it right

As 2020 begins, most companies holiday year will restart. Now is a good time to refamiliarise yourself with some of the more complicated areas of holiday pay. The following questions are the most common questions I received throughout 2019. Hopefully they pre-empt any situation you may have throughout 2020.

Q. What should be included in holiday pay?

A. In addition to the workers normal wage, payments that are “intrinsically linked” to their job should also be included. This includes but is not limited to; commission, overtime (including voluntary overtime if it is worked regularly enough), certain bonuses, standby/callout payments and acting up supplements.

Q. How do I calculate holiday entitlement for a casual worker?

A. All workers are entitled to the equivalent of 5.6 weeks per year minimum. This is obviously difficult for those individuals where we don’t know what hours they will work from a week to week basis. Most of my clients use the accrual calculation of 12.07% of hours worked. The calculation is not perfect but is a good rule of thumb.

Q. Should I use the 12.07% calculation for term time or seasonal workers?

A. No. In the 2019 case of Harpur Trust v Brazel, the Court of Appeal stated that the calculation for such workers should be calculated on an average of the previous 12 weeks (however see the any future changes question below)

Q. A worker was sick during pre-booked annual leave and now wishes to reclaim the holiday entitlement. Is this correct?

A. Technically a worker who is sick during annual leave can reschedule the leave. The case law is from Europe but is still legally binding in the UK. This is clearly open to abuse from employees and should be monitored closely.

Q. A worker couldn’t take annual leave and wants to carry it over. We have a “use it or lose it” policy. Can I refuse?

A. If a worker is unable to take annual leave during a holiday year then they are entitled to carry over up to four weeks. Unable means that they are either denied it by their employer or due to a period of sick leave/maternity they did not have a chance to take the leave.

Q. Can I force a worker to take leave?

A. Yes, as long as you give them notice of at least twice the length of the period of leave that the worker is being ordered to take. For example if you want them to take one week’s holiday you must give them two weeks’ notice.

Q. Are there any future changes proposed to holiday pay/entitlement?

A. Yes. Currently planned to take effect from 6 April 2020 employers wishing to calculate a “week’s pay” for employers will need to use an average of the previous 52 weeks, not the current calculation of 12 weeks.

What does this mean for you or your business?

Management and HR should keep an eye on legal updates to ensure that they are complying with UK employment law. An up to date understanding of the law may also assist in budgeting for financial years.

Recommended Reading

Keep an eye on our Twitter account @BPE_Solicitors for regular updates on all aspects of employment law.

 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

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