Advo Payroll Adviser, Dan Bolt looks at correctly paying staff holiday pay

We’re all going on a Summer Holiday!

Holiday season is now in full swing, as according to Project Britain, “Two thirds of all British people have their holidays in July and August”.

And whilst I’m sure we have all heard the popular tag line, “Nothing beats a Jet2 holiday”, being paid incorrectly for holiday pay can certainly put a downer on it.

Calculating holiday pay, isn’t always as simple as paying an employee their daily rate, especially when you have workers that don’t fit the traditional 9-5 Monday to Friday working schedule.

So here is how to ensure your employees are receiving the correct holiday pay.

Shift workers with fixed hours
Whether working part-time or full-time these workers should have their holiday based on their weekly rate. However, if the worker is paid at a premium for some of their shifts, e.g. if you pay a higher rate for night work than day work, a week’s holiday pay should be calculated on the average number of weekly hours worked in the last 12 weeks, at the average hourly rate for the same 12 weeks.

Casual Workers
Casual workers should be calculated at 12.07% of their hourly rate for the statutory minimum of 28 days which can be rolled up and paid with the workers usual pay providing it is shown as holiday pay on the workers payslip. But be careful, making holiday payments this way has been banned in Scotland.

Variable Hours Workers
These workers are again calculated differently. For a variable hours worker, a week’s holiday pay is the average pay they got over the previous 12 weeks that they were paid, meaning if an employee was not paid one week, you would keep going back until you had 12 weeks of earnings to average out.

Fixed Hours and Fixed Pay Workers
These workers are arguably the simplest to get right, with a week’s holiday equal to how much the employee gets for a week’s work.

Pretty straight forwards, right? Well not exactly, as Commission, Work related Travel, and Overtime to name a few, may impact what an employee is due.

Commission
Commission should be included in all holiday pay calculations where overall pay depends on the work done. Contractual commission schemes are the obvious example.

Work Related Travel
Pay made to workers for travel (outside of travelling to and from home to their place of work) also qualifies for holiday purposes.

Overtime
Whether required overtime, such as working one additional day every 4 weeks being part of the contract, or voluntary overtime where the voluntary overtime extends for a “sufficient” period on a recurring or regular basis, must also now be included in holiday calculations.

So, whilst it may seem simple to pay your employees for the time they are on holiday, getting the correct rate at which to pay them can be quite tricky to navigate, which is why if you have any questions, your payroll contact here at Advo should be your first point of call.