What employers need to know about holiday pay

On behalf of Attwaters Jameson Hill posted in Employment Law on Thursday, May 4th, 2017

With many workers planning their May bank holidays and summer breaks, employers need to be up-to-date with the current regulations governing time off and holiday pay.


Bank Holidays

In England and Wales, there are 8 permanent bank holidays. There is no statutory right for workers to take bank holidays off work; their right to time off depends on the terms set out in their contract of employment.

Neither is there any statutory duty imposed on employers to pay extra to staff who work on bank holidays. Again, any entitlement to extra pay depends on their terms of employment.
Part-time workers have the right to be treated as favourably as full-time workers, and this includes bank holidays. So, in most instances this would mean giving them a pro rata allowance of paid bank holidays.

Employers also need to be aware that a refusal to give time off to Christian employees for holidays with religious significance could leave them open to claims of religious discrimination if this places them at a disadvantage when compared with employees of other faiths or non-religious employees.

It’s worth noting too that if an employee’s contract requires them to work on bank holidays they cannot refuse to work, even on religious grounds.

If an employer has worded their employment contracts to say that employees are entitled to ‘statutory entitlement plus bank holidays’, this no longer denotes 20 days’ leave plus the permanent bank holidays. Minimum leave rose from 4 to 5.6 weeks in 2009 and means that this statement will grant 28 days’ holiday plus the bank holidays. Employers can set the times when workers can take their leave; for example, some businesses shut down over the Christmas period.


Calculating holiday pay

Under sections 221-224 of the Employment Rights Act, workers are entitled to a week’s pay for each week of leave they take. When calculating holiday pay there are different rules depending on the working patterns involved.

For workers with fixed working hours that don’t vary, holiday pay would be a week’s pay. For workers with no normal hours, holiday pay would be a week’s normal remuneration but is usually worked out by reference to the average pay over the previous 12 weeks in which they were paid. For shift workers, the calculation is broadly the same, but uses the worker’s average hourly rate.

Guaranteed overtime (where the employer is contractually bound to offer and pay for agreed overtime) and non-guaranteed overtime (where there is no obligation by the employer to offer overtime, but if they do, then the worker is obliged by contract to work overtime) should be taken into consideration.

At present, there is no case law that suggests that voluntary overtime needs to be included in the calculation. Commission and work-related travel should also be taken into account. A worker’s entitlement to holiday pay will continue to accrue during periods of sick leave. When workers leave, they are entitled to be paid for any leave they are due but haven’t taken.

When an employee starts work, details of holiday pay entitlement should be included in their written contract, or in their written statement of employment particulars, no later than two months after their start date. It is also good practice to include details of holiday entitlement and the procedure for requesting leave in your staff handbook.


Does your staff handbook need updating?

If your staff handbook hasn’t been updated in a while, you may want to review it in the light of changes to the National Living Wage and Statutory Pay.


Pay changes in 2017

From April 2017, the National Living Wage has risen to £7.50 an hour for 25 year olds. Those aged 21 to 24 are entitled to receive £7.05, for those aged 18 to 20 its £5.60, under 18, £4.05, and for apprentices its £3.50.

In addition, from April the statutory rates of pay for maternity, paternity, shared parental leave and adoption have all increased by £1.40 to £140.98 per week. These rates are reduced to 90 per cent of an employee’s earning if this is lower than the statutory rate. Sick pay has increased from £88.45 to £89.35 per week. To qualify for these statutory payments, the employee’s average earnings must equal or exceed the new lower earnings limit of £113 per week.

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