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Holiday Pay – The Accountants View

Another view

We’ve asked local accountants Greenstones for their comments on holiday pay.

Do you need a holiday?

It’s peak holiday season, which means lots of sun, sea and sand! But are you paying your team’s holiday pay correctly?

With holiday pay tribunals on the increase, it’s very important to stay up to date with changing legislation. Currently, holiday pay should be calculated on the last 12-week average and should include additional pay components, such as regular overtime, bonuses and commission.

With ever-changing laws, it has already been announced that the 12-week average will be increasing to a 52-week average in April 2020. If a team member has not been paid for this amount of time, then the average pay needs to be calculated on the number of weeks they have worked, in order to calculate the average weekly pay.

Strictly speaking, the rulings referred to apply only to the four weeks of holiday given to workers by the European Working Time Directive. However, it is being suggested employers may wish to apply holiday pay across a team member’s full holiday entitlement as a goodwill gesture – the decision is yours!

It is important that the holiday calculations are correct, as mistakes could end up proving expensive for your business. Team members have three months less one day to make a claim for any wrongly paid holiday.

If a situation ends up unresolved and results in an employment tribunal, you may end up having to backdate the holiday calculation for up to two years! There is also the risk of damage to your business’ name and reputation as a result of being involved in team member disputes, which in turn could affect your brand and the way you are perceived by customers and other stakeholders. Furthermore, employment tribunals lead to your precious time having to be spent on gathering the evidence required to fulfil the case, instead of generating extra revenue for your business!

Therefore, it is key that you get this right. These are the rules at present but the legislation is constantly evolving, and the European Working Time Directive may be set to change again as Brexit continues to unfold.

If you want any advice or to take the daily stress out of your payroll duties, then feel free to give GreenStones a call on 01733 371180.

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