Holiday allowance changes baffling UK employers

Over a third of decision-makers are unaware of recent changes to how holiday pay is calculated, according to a recent poll.

HR and employment law business Citation commissioned OnePoll to ask 500 UK decision-makers if they knew about the recent changes to how holiday pay is calculated.

They found 38% of employers were unsure about their legal requirements meaning they could be breaking the law if they provide regular overtime to their staff

The government has committed to introducing state enforcement of holiday entitlement in its Good Work Plan, which is due to come into effect in April 2020. It aims to crack down on the underpayment of holiday pay.

Gillian McAteer, head of employment law at Citation, says: “Holiday pay must be calculated on the basis of the employee’s normal pay. Where an employee normally works overtime, this should be included in the calculation of their holiday pay.”

“There is no definition setting out how regularly overtime must be worked for it to be included, but the general principle is that pay that is ‘normally received’ should be included in holiday pay.”

“This will also include many other regular payments such as commission and allowances linked to carrying out the duties of the role”

In 2017, the Employment Appeal Tribunal ruled that employers must include regular non-guaranteed overtime in holiday pay. Earlier this year the Court of Appeal ruled that this should go even further and include regular voluntary overtime in holiday pay.

Citation has published a white paper simplifying the key changes from The Good Work Plan, allowing employers to better understand the actions they need to make before April 2020.