Recent legal developments on how holiday pay is calculated could be the biggest issue for employers in 2014.

New cases have resulted in clarifications on the law relating to holiday pay. This could create large financial liabilities for employers. In some cases, employees will have claims for a shortfall in holiday pay that could go back several years. In many cases the whole workforce will be affected. According to reports, John Lewis recently paid out £40 million to employees as a result of the miscalculation of holiday pay. It is vital that you are aware of the significance of these developments.

The MacRoberts Employment Law Group has a solution for employers. We can come to your premises to carry out a Holiday Pay Audit, followed up by a report identifying major areas of risk and making recommendations to you on how to deal with that risk.

Holiday pay isn’t based only on basic pay

Many employers currently base holiday pay calculations on basic salary only. Recent cases have established that employers should calculate holiday pay based on “normal remuneration”. Any payments or allowances that are intrinsically linked to the worker's job and which have a degree permanence should be “counted”. For example, shift allowances, contractual overtime, payments for anti-social hours and commission should all be considered.

Long term Sick Employees Can Carry Over Holidays

Employers who have employees on their books who have been absent on long term sick leave for many years (on permanent health insurance schemes or otherwise) may have a significant liability in respect of accrued holiday pay. Case law has established that such employees must be permitted to carry over certain holiday entitlements, not only into the following holiday year, but beyond.

What Does a Holiday Pay Audit Involve?

For a fixed fee of £950 plus VAT we will:

  • Meet with you (in person or by conference call) to understand the remuneration arrangements that apply to your staff
  • Review your contracts and handbooks and analyse the way in which you calculate holiday pay for your employees
  • Consider holiday pay liabilities for long term sick employees