Holiday Pay Calculations

 

 

There is still a lot of confusion with smaller business owners on whether they should be including overtime in holiday pay calculations. Since the news coverage in November 2014 there have been a number of cases that are going to tribunals and appeals that may change the position but for the current time these are the guidelines to follow:

 

• Where a contract of employment has set hours per week then holiday pay is based on the actual hourly rate of the employee for the hours taken as holiday.

• Where a contract of employment has set hours per week with the requirement to work compulsory overtime (where the employee has no choice in the matter) then holiday pay is based on the average earnings for the 12 weeks preceding the holiday period and this includes compulsory overtime.

• Shift and rota workers are slightly different. Their average weekly hours of work, in the preceding 12 weeks, are multiplied by their average hourly rate. The hourly rate is calculated as above and includes any shift allowance which is payable.

•  If a worker has no normal hours then, If a worker has no normal working hours then a week’s pay is the average pay received over the preceding 12 weeks. Any week for which no pay was due should be replaced by the last previous week for which pay was due.

 

Voluntary overtime does not have to be included in holiday pay calculations on the current basis that with voluntary overtime, the overtime payment is payment for inconvenience which is not necessarily therefore part of an employee’s normal pay and therefore shouldn't form part of the holiday pay calculations. This may change in the future but there is currently no case law to require employees to include this.

 

If you are still feeling confused an unsure then why not call us and we can check out your arrangements and ensure you are following the correct calculations. Call us o 0844 8797286.