Payroll and holiday pay

As the summer draws to an end many employers will have paid their staff some holiday pay. However, for some employers the calculation of holiday pay and leave can be quite tricky and not straight forward.

The statutory minimum is 5.6 weeks for full time workers and pro rata for part time workers. This is made up from 4 weeks EU Working Time Directive and 1.6 weeks from the UK regulations (bank holidays). Of course, some employers provide additional entitlement.

One of the big questions is what should be actually included in holiday pay?  There have been many court cases in recent years where overtime and commission payments have been involved.  Often raising more questions than answers! Consideration needs to be given to what is included within holiday pay and you must take into account a worker’s total remuneration. Commission payments must be included in your calculation and overtime needs to be looked at carefully as this also may need to be included.

If you have staff who work casually or irregular hours then it maybe a good idea to calculate holiday entitlement as the hours are worked. You must not use the ‘rolled up pay’ method where you include holiday pay in your workers hourly rate.

For further guidance please give our payroll team a call on 01904 464100 or email Julie Gunnell at jgunnell@garbutt-elliott.co.uk.