No employer will have escaped the plethora of employment tribunal cases on holiday pay over the last few years discussing issues such as whether commission and overtime should be included in holiday pay calculations.
However, you may have missed the change that is on the horizon for 6th April 2020 relating to the reference period for determining average pay.
Presently statutory holiday pay for employees who do not have ‘normal working hours’ or whose pay varies (either by reference to the hours worked or amount of work done) is calculated by looking at average pay over the preceding 12-week period. However, from 6th April 2020 this period will be extended to 52 weeks.
The extension was announced as part of the government’s Good Work Plan and is clearly intended to ensure that those working irregular hours throughout the year are not disadvantaged when they take their holiday. For example, workers who work longer hours during busy periods may try to take holiday during the quieter periods, but this is typically when they will have lower average pay.
So, is your business ready for this?
Obviously, you will need to make sure your business is aware of the change and ensure those calculating holiday are adequately trained on this. However, have you thought about the administrative impact of the changes and whether your system is even capable of running this new calculation?
For example, do you keep records of your employees’ working hours and pay? If so, do you keep these for 12 months or more?
If not, you will need to start keeping accurate records now to ensure you have as much data as possible. This may simply be a case of amending your retention policy, so information is kept for longer. However, for some this may involve considering whether more expensive methods are required, such as electronic signing in software.
12th April 2019