Getting it Right this Easter! Holiday Pay for Employees.

As we move through Spring and Summer approaches the planning of holidays takes on a renewed importance. Since the advent of the Working Time Directive, all employees have been entitled to paid holidays. The question, however, arises “how much holiday pay should they get?” The answer is a day's pay. But what does that actually mean?

In the case of employees who work fixed hours for a fixed wage, that is easy to calculate. The problem becomes more difficult when the employees in question work longer or shorter hours or overtime at different times of the year. The UK Employment Tribunals have considered this point and found that a day's pay means what the employee would have earned had the worked on the days which they were off, so this would include potential overtime, commission or other similar payments. In practice this is calculated as their average daily pay over the 12 weeks preceding the holiday. Clearly this will change over time, so to ensure compliance an employer should perform that calculation for each employee each time they take a holiday. This may seem a great deal of work, and indeed it is. The consequences of getting it wrong are, however, potentially serious.

You as the employer could face a claim for the underpayment of wages in the Employment Tribunal or even worse, the claim could be brought in the County Court where the employee could seek to go back and claim over a period of six years for underpaid holiday pay. It is, therefore, important to get it right.

This blog was written by Dr Michael Green. For more information on matters discussed in this article, call Phillipps Green and Murphy Solicitors on 01792 468 684.