Holiday pay should it include over time?
23 December 2015It seems apt to be discussing holiday pay as we all throw ourselves into the festivities. If you are fortunate to be in an industry that shuts down over the Christmas and New Year period how will these new rulings effect how you pay your staff? Conversely if you are an industry like hospitality which is exceptionally busy this time of year with workers on overtime, how will that effect their subsequent holiday pay?
I wish there was a blanket answer that covered all employers, but sadly that doesn’t appear to be the case. It is quite normal for HR matters to receive guidelines rather than definitive answers.
As a HR specialist the best I can advise is: Tell me all of the company and employee circumstances and I will advise according to the specific circumstances.
Here are some of the points you will need to take into consideration when calculating your employees holiday pay and whether it should include increased payments due to previously worked overtime:
- Is it a regular occurrence?
- Is it contracted?
- Is it voluntary?
- Is it paid at a higher rate than normal hours?
EAT guidance states: when calculating holiday pay, employers should include non-guaranteed overtime. This is overtime which is not contractually guaranteed, but which the employee is obliged to work if it is offered or required by the employer.
Holiday pay should it include overtime?
In a recent Telegraph article, Anthony Sutton states:
“Many businesses were worried about how far back such claims for overtime may be allowed to go and the judgment was clear that, in normal circumstances, any claim for underpayment of holiday would need to be brought within three months. In practical terms, and when calculating holiday pay, you should review the previous three months’ employment and take the average amount of overtime paid to be included in any holiday pay.”
Bear in mind this will only apply to the four-week statutory holiday element of an employees’ holiday pay per year. Any additional holiday does not need to include overtime.
It also means that under The Deduction from Wages (Limitation) Regulations 2014, making a claim for backdated deductions from wages for holiday pay will be capped at two years on all claims bought on or after 1st July 2015.
All these rulings and guidelines depend upon your own situations and contractual agreements (and in some cases those that may have become contractual through custom and practice even if not contained within written agreements).
If we look at some of these recent rulings regarding holiday pay and overtime, then it appears if your employee takes a holiday within 3 months of a busy season (which has non-guaranteed overtime) they are likely to have a much higher holiday pay than if they took them later in the year.
For more specific advice regarding holiday pay or for any other employment matter contact Solved HR for an initial consultation on 07714 790024 or email in confidence info@solvedhr.co.uk