Holiday Pay 101
Paid annual leave is a topic that will likely be close to your employee’s hearts because who doesn’t love to go on holiday! So you need to make sure that you have your holiday pay calculations right, and make sure you have a clear process so that everyone can enjoy some fun in the sun.
The rationale of the courts when considering the issue of holiday pay is that nobody should be discouraged to go on holiday by earning less while they are away than they would get when they are at work.
As a basic starting point all workers are entitled to a minimum of 5.6 weeks holiday pay a year, plenty of time to get a good tan!
If you are a new employer, or your process for calculating holiday pay could do with revisiting, then you may want to start by learning about two of the most contested areas, so you know where to focus when putting together your own ironclad processes.
Firstly, there is the question of voluntary overtime, and whether this should be included in the calculation of holiday pay.
This has been stretched to include commission, compulsory and guaranteed overtime. You should include the fact that your employee receives regular commission in your holiday pay calculation (great news for all the employees!)
Secondly, there is the issue of how many years back employers have to pay any shortfall for if sued by workers for unpaid holiday pay entitlement.
There are 2 bars to these type of claims (which is good news for the employer)!
- Where a claim is based on a series of deductions, any gap between deductions in the series of more than 3 months will break the chain, and any claim for the deductions before the gap will be time barred.
- Back pay can only be claimed for in relation to the 2 years before the claim was put in.
Holiday pay can be a touchy subject so make sure you are clear on what your employees are entitled to, and make sure you’re not at risk from a claim. If you are unsure on your processes at work, as the employee or employer, come by our offices on any first Tuesday of the month for our commercial drop in clinic!
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