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EMPLOYERS: TAKE THE TIME NOW TO MAKE SURE YOU CALCULATE HOLIDAY PAY CORRECTLY!

Does your business pay overtime, bonuses or commissions to employees?  If the answer is yes, then read on to ensure your employee's don't have a claim for more holiday pay.

Most employers will be aware of the recent media reporting in relation to underpaid holiday pay for more than 24,000 public and private sector workers. 

It appears these miscalculations have arisen because holiday pay calculations can either be based on the employee's ordinary weekly pay when they take annual leave, or on their average weekly earnings over the previous 12 months. Employer's must pay whichever rate is highest.

Bonuses and one-off payments can also increase an employee's holiday pay rate. The Holidays Act 2003 says non-discretionary bonuses are part of gross earnings and must therefore be included in holiday pay calculations.  Discretionary bonuses are excluded.

Employers should record daily hours and extra payments in their payroll systems, especially where employees work fluctuating hours.

Current and past employees can claim wage arrears going back six years.  We recommend you audit your payroll system now and address any issues to avoid unexpected claims in the future. 

For more information, contact Shima Grice.

Written by Shima Grice at 09:00

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