Confused by How to Calculate Holiday Pay?

Confused by How to Calculate Holiday Pay?

13 May 2016

Confused by How to Calculate Holiday Pay?

Do you get headaches over how to calculate holiday pay for your employees as a result of recent and ongoing changes in legislation? Whether you are an employee or employer it can be difficult to know just what needs to be included in the holiday pay calculation.

The statutory minimum for paid holiday entitlement in the UK, is 5.6 weeks which works out at 28 days based on a 5-day week. Bank holidays, unless they are to be taken as unpaid are usually included in this entitlement.
If an employee works set hours without any variations such as overtime, guaranteed or non-guaranteed, commission or work related travel, calculations are simple however; key points to take into account when calculating holiday pay are;

Guaranteed and Non-Guaranteed Overtime.
Commission
Work-related travel
Sick leave
Different Work Patterns

Guaranteed Overtime
Guaranteed overtime is when an employer is obliged to pay and for and offer overtime as set out in an employment contract.

Non-Guaranteed Overtime
Non-guaranteed overtime is where there is no obligation by the employer to offer overtime but if they do then the worker is obliged by the contract to work overtime.

Voluntary Overtime
Voluntary means there is no contractual obligation for you to offer overtime or for your employees to work it even if offered the opportunity to do so. At this moment in time there is currently no definitive case law to include voluntary overtime however; some employers are choosing to include voluntary overtimes payments as well rather than being hit with a big ‘bill’ should this be tested and included at a later date.

Commission 
Commission is usually an amount of money an employee receives as a result of making sales and can make up part or all of their earnings. Commission must be factored into holiday payments for 4 weeks of the statutory entitlement required by Law. There is currently no requirement to do this for the additional 1.6 weeks.

Work Related Travel
This will usually mean any travel that is made for work purposes that is not a part of an employees commute to their usual place of work. If payments are made for time spent travelling to and from work as part of a worker’s normal pay, these may need to be considered when calculating holiday pay.

Sick Leave
If an employee is off sick, be it paid or unpaid, their annual leave will continue to accrue. If they are unable to take their annual leave due to sickness, they should be allowed to carry that annual leave over until they are able to take it.

Different Work Patterns
Regardless of the work pattern, an employee should receive holiday pay that is equal to their normal weekly wage.

If you are unsure about any of the key points above or are an employer wanting to make sure you are complying with current legislation, Solved hr are here to take the confusion out of it for you! Give us a call on 07714 790024 or email info@solvedhr.co.uk and we will be happy to help.