As everyone nears a well-deserved holiday, one small detail presents a headache for some employers: What are we meant to pay our team?
At Payroll Intelligence, we help employers stay on the right side of the Holidays Act. We have seen our fair share of those who trip up at this time of year. Here’s a plain-English explanation of some things to watch out for.
If we pay an employee a Christmas bonus, does that need to be included in their Annual Holiday pay calculations?
Under most circumstances, a Christmas Bonus would be considered a Discretionary Payment. That means that the Bonus does not get included in the two calculations (AWE and OWP) you need to evaluate when paying Annual Holiday.
What if we are shutting down and the employee has no Annual Holiday Entitlement?
The typical example of this is team members who commenced employment in 2022: they have only been with you for a handful of months by now and haven’t yet got to the milestone of 12 months which is when they become entitled to Annual Holiday (Don’t confuse the notion of ‘Accrual’ with actual Entitlement). Remember, you might have some more tenured employees in this same situation too because they have used up all their Entitlement on earlier holidays. So what can be done? Three main options are:
- You can let someone take Entitlement in Advance. Think of that like an overdraft facility which gets topped up when they reach their next 12 months milestone.
- You can cash out the part-year accrual, which ends up being a bit trickier than it sounds.
- The employee can take Leave without pay.
Annual Holiday versus Public Holidays?
It’s entirely possible that a Public Holiday falls in amongst an employee’s Annual Holiday. If the employee would have worked a Public Holiday, they are entitled to a day’s paid Public Holiday. The remaining time away from work is Annual Holiday. Just to make life confusing, the rates of pay for a Public Holiday not worked (RDP or ADP) are different to what gets paid for Annual Holiday.
Is our payroll system actually doing this all correctly?
It will be almost impossible for you to tell. Our advice; enjoy your break and try not to worry about it for a couple of weeks. Any inaccuracies shouldn’t result in massive issues over such a short period. Put it in the diary for 2023 to sit down with Godfreys Law and Payroll Intelligence to have a check of your overall compliance.
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