The rules on how employers calculate holiday pay for some workers is set to change, with new regulations coming into effect in April 2020.
Working out holiday pay for employees that have fixed-hours is straightforward – if they are paid £500 for one week’s work, then they should be paid £500 per week when they’re on holiday.
However, for workers with irregular hours, such as those on zero-hours contracts where their pay is different each week, then this can be more difficult to calculate.
In this case, holiday pay is based on weekly earnings. The current rules state that you must take the average pay of the worker over the 12 weeks prior to their holiday.
This is set to change in April 2020, with employers now taking the average weekly wage over the 52 weeks prior to the worker’s annual leave to calculate their holiday pay rate.
There are additional things for employers to remember, with a focus on keeping accurate records of working hours over the year. This is pivotal as if you underpay your workers, even accidentally, they can take you to an employment tribunal. There is a variety of online tools and software platforms that allow you to track working hours, such as overtime during busy periods.
Compulsory overtime must be considered in holiday pay, and it may be prudent to also factor in voluntary overtime, following a tribunal ruling last year.
For workers on fixed-hour contracts, this may happen on a regular basis, particularly during busy periods, so it’s essential that businesses are aware of this when calculating holiday pay.
For help and advice on matters relating to employment law, contact our expert team today.