Ashtons Legal's Blanche McDade explains why care needs to be taken over holiday pay

A worker must receive a minimum of 5.6 weeks of holiday per year and be paid the equivalent of a week’s pay for a week’s leave.

The 5.6 weeks is made up of four weeks from the Working Time Directive (WTD) and an additional 1.6 weeks under the Working Time Regulations (WTR), however the rules on what should be included within holiday pay are slightly different under the WTD compared to the WTR. The 5.6 weeks includes eight public, or bank, holidays.

The holiday pay a worker receives must be the equivalent of their normal remuneration. If a worker works the same hours, at the same time each week and the pay does not vary, then the holiday pay is simple to calculate as the worker receives the same amount of remuneration each week.

However, if a worker does not have normal working hours or they do have normal working hours but their pay varies due to the times the work is done or the amount of work done, the rules on holiday pay become more complicated.

Calculating holiday pay

As of April 6, 2020, a 52-week reference period of the workers’ pay should be used to calculate the normal remuneration period (or the number of complete weeks a worker has worked there if less than 52 weeks). Periods where the worker did not perform any work and was not paid should be disregarded.

When considering what should be included in calculating a worker’s normal remuneration, other things should be taken into account such as overtime, bonus and commission payments, shift allowances and premiums, travel allowances, standby/call out payments and any other taxable allowances.

It is imperative that employers calculate the holiday pay correctly as workers (within certain claim limits) could claim for historic back pay which would have to paid back in one lump sum if the worker is successful.