Employers Must Calculate Holiday Pay Properly

Summer is now well underway, meaning many UK employees will be enjoying a well deserved - and fully paid - break from work.

Although more straightforward for those employed in fixed-hour contracts, for part-time workers, those on zero-hours contracts and even employees who earn commission, calculation of holiday pay can be far more easily misunderstood.

Mistakes in calculation can be extremely costly, as experienced by the John Lewis Partnership who paid out £40m between 69,000 staff in 2013 for underpaid holidays.  Although the company only paid out to those who had been part of the group since 2006, they could face liability for underpaid holidays from as far back as 1998, the year that the Working Time Regulations (WTR) were introduced.

The problem resulted from John Lewis making mistakes for workers who had worked Sundays or Bank Holidays, where a premium rate of pay was due. The very fact that such a large company on such a scale and for so many years had been making miscalculations highlights how difficult it can be to work out entitlement.

Four weeks of all UK employees entitlement comes from the EU’s Working Time Directive, however the remaining 5.6 weeks UK entitlement is currently treated differently, which confuses the situation.  Consequently, until the WTR is brought in line with European jurisprudence, decisions such as Lock v British Gas which held that workers are entitled to incorporate commission into their holiday pay calculation, will only affect the first 4 weeks of UK employees’ leave entitlement.

It is clear that changes must be made to clarify the law and ensure employees and workers are receiving the pay they are entitled to, but until then, employers should tread carefully when making their calculations to avoid mistakes, which can result in costly claims.

Holiday Pay Advice Lawyers in Glasgow?

Whether you are an employer or employee looking to speak to one of our Glasgow based lawyers about holiday pay entitlement, Employment Law Glasgow can help. To get in touch, please call 0141 811 0224. Alternatively, please complete our online enquiry form.