Read our Holiday Pay interview with the CIPP's Helen Hargreaves
Helen Hargreaves, Policy & Research Manager at the Chartered Institute of Payroll Professionals visited IRIS recently to take part in our IRIS & Earnie Online Payroll Conference event, afterwards we sat down with Helen to get her opinion on the recent changes to Holiday Pay, and how businesses could be affected by the rulings.
Q: Why is an understanding of Holiday Pay so important for businesses?
A: “Holiday Pay is important for two reasons. One, because of course it’s the law and you have to give people paid time off; but apart from that there’s a big reason for it, people have to take holidays because if they don’t they’ll burn out. You need it to keep you fresh for your work and if people are going to lose out by being on holiday – financially disadvantaged – they’re going to be less likely to take the holiday and then you have a vicious circle.”
Q: Are all employees of a business entitled to receive it?
A: “More or less, yes. The Working Time Regulations covers entitlement to paid Holiday Pay, and these apply to all workers, not just employees – and there is sometimes a difference. You have to be careful with agency workers, because it depends who pays that worker, they’re the ones that are responsible. So if the agency pays it, fine; but if not then the hirer would need to take that on board. There are some variations for agricultural workers, and then you do have some specific exclusions such as air, rail, road and sea workers; inland waterways, sea fishing, doctors in training, armed forces, police and so on.”
Q: What is the reaction by the CIPP to the recent Holiday Pay Tribunal Rulings?
A: “We’re not really any further forward. We had a tribunal ruling on Monday (22nd February) which was widely expected and told us nothing. The problem with the rulings is that, we know that you have to include guaranteed and non-guaranteed overtime as well as commission payments when calculating Holiday Pay, what we don’t know is how to do that. The European Courts have left it to individual Member States to decide how to perform that calculation, but there are so many cases waiting to be ruled on, that our Government is not yet in a position to provide us with detailed guidance as to how to do it. The CIPP reaction is that payroll practitioners are in a predicament, because we know we have to do it, but we just don’t know how.”
Q: What effect on businesses do you think these rulings will have?
A: ”There could be a significant financial impact for some businesses. In particular those businesses who have employees with jobs which require a lot of overtime that must be considered for inclusion when calculating Holiday Pay. And then there are other organisations where commission payments are a significant element of the remuneration package. Using a 12 week reference period for calculating holiday pay in these circumstances could have considerable impact on some businesses.”
Q: What advice would you give to a business following the rulings?
A: “We would advise businesses to start having a look now at the policies and procedures that they’ve got, and to look at what types of overtime they currently offer and which they currently include in Holiday Pay calculations. Also whether they’ve got a process for looking at what type of annual leave an individual is taking at any one given time, because of course as things stand, overtime and commission payments need only be included in Regulation 13 leave, the 4 weeks leave we are entitled to under the Working Time Directive. We know that some businesses have set up processes to allow them to document that so it would be useful to have some networking and sharing of best practice. They also really need to look at how they intend to go forward, do they implement the changes now because it’s the law and they should, or do they hold off until the business guidance comes out but then run the risk of being taken to a tribunal.”
Q: What role do you see software and technology playing in managing Holiday Pay?
A: “Good software is intrinsic to payroll being able to perform these calculations. The rules, even though they’re not fully set out yet, are so complicated that it’s got to be software which is the main way to keep track of everything. It won’t be impossible for employers to do this without software, but it would be incredibly burdensome.”
Q: Are there any ‘dos and don’ts’ that businesses should be aware of when it comes to Holiday Pay? For example, can an employer require an employee to work on a holiday? If so would they have to pay extra?
A: “We’ve recently looked into this, and we’ve been through all of the regulations to see what we can find but there is nothing that covers cancelling booked leave. Contracts should specify what notice and compensation, if any, an employer should provide if they cancel agreed annual leave. And no, businesses do not have to pay them extra pay because an employee would usually just keep that holiday and take the time off at another time though circumstances might suggest extra compensation for good will. Ultimately, it all comes down to the contract.”
IRIS have developed the IRIS Holiday Pay Module to help businesses manage Holiday Pay as easily as possible. The IRIS Holiday Pay Module is an additional package which integrates with your existing IRIS payroll software to automatically calculate and pay the 12-week average weekly earnings for Holiday Pay as part of your usual payroll run.
Visit our Calculating Holiday Pay insight page to learn more about the module and the legislation changes.
You can learn more about the Chartered Institute of Payroll Professionals here.
You can learn more about the IRIS & Earnie Online Payroll Conference, and download the presentations from the event below.