Blog

Holiday Pay, Overtime and Commission: Making Sense of Annual Leave

Holiday Pay Overtime and Commission Making Sense of Annual LeaveThe calculation of holiday pay and overtime can be a little confusing, particularly when you are employing members of staff who are working different hours. It is important to get it right though and, in my experience we sometimes find it to be more difficult than it really needs to be. As an employer you need to have good knowledge of the fundamental elements of holiday pay, overtime and commission, so you don’t make any errors and you can answer any queries your employees may have.

Holiday Pay

The standard number of holidays is 28 days for staff who work full time hours (5 days per week.) This is the limit for statutory annual leave and may include bank holidays. Employers may allow staff to take more than 28 days, but they would be responsible for paying this. A simple way of working out annual leave is to multiply the total weekly working days by 5.6. For example:

John works 4.5 days per week. You would calculate his leave by multiplying 4.5 by 5.6 = 25.2 days holiday per year.

It is important to remember that 28 days is the limit, so even if a member of staff works 6 days per week, they won’t be entitled to any additional holidays, unless paid directly by the employer. Hopefully this makes it a lot simpler to work out, and clearer to answer, for the next time you are asked about holidays. I find it useful to have a note of this on my workstation, so I know I’m definitely giving out accurate information.

In the creative industry, it is quite common to hire employees via agencies or on flexible contracts. Staff employed through agencies are entitled to the same amount of holidays as permanent employees, although this will be paid through the agency.

Overtime

There are three different types of overtime; guaranteed, non-guaranteed and voluntary. Guaranteed and non-guaranteed overtime hours should be taken into account when calculating overtime. In the case of voluntary overtime i.e when the employee has an option to say yes or no, there are no rules for including this in holiday pay. However, in my experience, it is good practice to pay employees for holidays, even for voluntary overtime. It ensures they feel valued and means they will be more likely to help out again in the future.

Commission

The term commission refers to money an employee makes through sales and can either be additional to other earnings or in some cases, it may be the full earnings. Commission should be taken into account when calculating holiday pay. As part of a tribunal* involving three companies who earn mainly commission, The Employment Appeal Tribunal said that other elements should be taken into account, rather than just basic pay and this includes overtime and commission.

Holiday pay can be complex, but the best way to combat this is to either talk directly to the employer or liase via your Consultant.

* http://www.theguardian.com/small-business-network/2014/nov/07/holiday-pay-ruling-small-businesses