How to work out holiday pay

by Nadine De Souza

Your employees are entitled to be paid while on holiday leave. Employees are entitled to a week’s pay for every week of statutory leave. That’s easy if your employees have normal hours, but what happens if they don’t? How much do you have to pay them? Have a look at our guide to find out all you need to know about holiday pay.

Employees with normal working hours

If an employee’s pay doesn't vary according to the amount of work done, then a week’s pay is the amount due for a week’s work as set out in the employment contract. Guaranteed overtime is where the employer is obliged by contract to offer and pay for agreed overtime. Non-guaranteed overtime is where there is no obligation to offer overtime but if the employer does, then the employee is obliged by contract to work it. Voluntary overtime is where the employer asks the employee to work overtime and the employee is free to refuse. Guaranteed and non-guaranteed overtime payments should be taken into account when calculating holiday pay. However, there is currently no definitive case law that says voluntary overtime needs to be taken into account..

Employees with variable pay

This type of arrangement may occur under a piece work, bonus or commission scheme. A week’s pay is the normal weekly working hours multiplied by the employee’s average hourly rate over the preceding 12 weeks. To calculate the average hourly rate you can only take into account the hours when the employee was working. Overtime can be included but must be adjusted to the normal rate of pay.

Shift and rota workers

Their average weekly hours of work, in the preceding 12 weeks, are multiplied by their average hourly rate.

Employees with no normal hours

A week’s pay is the average pay received over the preceding 12 weeks (in which they were paid).

Calculating the average hourly rate

To calculate the average hourly rate, only the hours worked and the pay received can be counted. Take the average rate for the last 12 weeks. If there was no pay in a week, then count back a further week so that the rate is based on 12 weeks in which pay was paid.

Help from Lawpack

If you want more in-depth information – from an employment lawyer – about all aspects of employment law, then read our guide Employment Law Made Easy. Packed with tips and expert advice on complying with employment legislation.

For more information on employment contracts or to download a legally valid, solicitor-approved employment contract see Lawpack’s Employment Contract.

Other information

External links

Published on: December 1, 2014

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