The question used to be an easy one for employers, but the current answer seems anything but… just how exactly do you calculate statutory holiday pay?
With the peak holiday period upon us and the widespread publicity around recent court judgements, employees will no doubt be paying a little extra attention to what exactly is contained within their holiday pay packet this year.
Previously only basic pay was used to calculate the amount an employee would be paid while on leave.
But after workers won a landmark case late last year the courts ruled that overtime and commission should be included in holiday pay
This clearly has implications for businesses where workers are required to do regular overtime or paid commission as a part of their job.
It means the rules employers use to work out the amount of holiday pay may need to be updated.
The issue though is not clear cut, and it is complicated by the fact that no definitive guidance has been provided regarding what is the correct reference period to use when calculating holiday pay to include commission or overtime payments.
In light of the court judgements ACAS have published online guidance setting out six key points on working out holiday pay:
- Guaranteed and normal non-guaranteed overtime should be considered when calculating a worker's statutory holiday pay entitlement but there is currently no definitive case law that suggests voluntary overtime needs to be taken into account.
- Commission should be factored into statutory holiday pay calculations.
- Work-related travel may need to be factored into statutory holiday pay calculations.
- A worker’s entitlement to holiday pay will continue to accrue during sick leave.
- There are different rules for calculating holiday pay depending on the working patterns involved
- Workers must take their statutory paid annual leave allowance and can only be 'paid in lieu' for this when their employment ends.
