Payment of Holiday Pay in the Headlines

Making headlines earlier this month was the news that not all government employees have been paid holiday pay correctly. Others have come out to say that this issue is probably more widespread than just in some government departments.

The current legislation is that annual holidays are paid at the higher of ordinary weekly pay or average earnings for the last 12 months immediately before the end of the last pay period before the annual holiday is taken. Ordinary earnings includes regular components to pay such as additional hours, commissions etc.

It is recommended that you do take this opportunity to check that your payroll system is set up to calculate holiday pay on this "higher of" requirement and that any regular components to pay are being included in those calculations.

For sick leave, bereavement leave and public holidays the payment calculation is relevant daily pay, or where it is not possible to calculate relevant daily pay, the average daily pay calculation is to be used. Relevant daily pay is what the employee would have received had they worked that day. Again this includes any regular components to pay such as additional hours or commissions. Where it is not possible to calculate the relevant daily pay rate (such as for an employee on variable days/hours of work) then use the average daily pay calculation. This formula is gross earnings for the 52 calendar weeks immediately before the end of the pay period before the calculation is made, divided by the number of days the employee has worked and been paid for (days worked plus paid holidays) in that 52-week period.

If an employment agreement specifies a special rate of pay for any type of holidays this should only be paid if it is equal to, or greater than what would otherwise be due.

For more information on calculating any type of payment under the Holidays Act, or for help with reviewing whether you are correctly paying leave, please contact a member of the Grow HR team.