Should holiday pay include overtime and commission?
With the unusually high temperatures we have gotten recently in Britain we can agree that summer is officially here. While that is great news for most, especially for employees packing their bags and getting ready for their summer holidays, it leaves employers with the headache of calculating annual leave entitlements. The areas of whether holiday pay should include commission and overtime have been hot topics of late.
Lock v British Gas Trading Ltd
Mr. Lock claimed that British Gas had calculated his holiday pay incorrectly by not including a commission element. Mr. Lock was employed by British Gas as a sales consultant and receives a basic salary plus commission based on the sales he achieves. During a period of annual leave, Lock saw his income was reduced as he was paid only his basic salary and not commission as he was not making sales during his holiday. The Employment Tribunal found that Mr. Lock’s holiday pay should include an amount to reflect the commission that he would have otherwise earned had he not taken annual leave. They found that by penalizing an employee’s holiday pay might discourage them from taking annual leave for the fact that they would not be able to make sales and earn commission during that period.
Fulton & Baxter v Bear Scotland Ltd
Fulton and Baxter (the claimants) claimed that Bear Scotland Ltd (the respondent) made unauthorized deductions from their wages when overtime and other payments had not been included in the calculation of their annual leave pay. The ET found that by omitting these additional payments from its annual leave calculations, the respondent had indeed made unauthorized deductions from the claimant’s wages.
Learning Points
These recent rulings indicate a new perspective on what is deemed to be fair in relation to the calculation of leave entitlements. In light of these cases, employers across the board are reviewing how they calculate holiday pay. The current position is that, if there is a fundamental link between commission received and the performance of tasks, the commission should be included in the calculation of holiday pay. Therefore, where an employee would have earned commission during the leave period had they worked, it should be included when calculating holiday pay.
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How can BrightPay Connect benefit your payroll bureau?
BrightPay Connect our latest cloud add-on works alongside BrightPay Payroll. Payroll information is stored in the cloud and can be accessed online by you and your clients anywhere. BrightPay Connect offers additional innovative payroll and HR features that will enhance client relationships and increase revenue for your bureau.
Secure online Backup
Don't worry about manually backing up or losing your client payroll data again. Simply link an employer to BrightPay Connect, then the payroll data will be automatically synchronised to the cloud as you run your payroll or make any changes. Payroll files are automatically backed up every 15 minutes when open and again when closed down, offering cloud security against ransomware and cyber attacks. A chronological history of backups will be maintained which can be restored at any time.
Bureau Dashboard
Access your online multi-company dashboard which gives an overview of clients’ payroll information in one place. BrightPay Payroll and BrightPay Connect are automatically synced to capture annual leave and changes to employee details.
Client / Employer Access
Invite clients to their own company dashboard where they have online access to an overview of their employer details, employee requests, employee contact details, employee payslips and any outstanding amounts due to HMRC. Payroll reports that have been set up and saved in the payroll are automatically available on BrightPay Connect.
Employee Online Access
Employees can access their own personal self service portal from any computer, tablet or smartphone. They can view and retrieve their historic payslips and other payroll documents such as a P60, P45, or P11d which can be exported to PDF and printed. Employees can easily submit holiday requests, view leave taken and leave remaining as well as amend personal contact details.
Annual Leave Management
Your client can view a company leave calendar allowing them to effectively manage their staffing resources and plan ahead to ensure there is sufficient staff cover at all times. Once an employee requests leave, clients can authorise or reject the request which then flows back to the payroll. Clients will have full visibility of how much leave an employee has taken, the number of annual leave days remaining and how frequently an employee is on sick leave.
HR Solution
BrightPay Connect has built-in features giving your clients a ready-to-go HR solution. HR documents can be uploaded including employee handbooks and contracts, disciplinary documents, company newsletters, training material and more. Clients can also manage all leave for their employees including sick leave, annual leave, maternity leave and paternity leave.
Benefits for Payroll Bureaus
BrightPay Connect introduces powerful new online features that offers a range of benefits for your bureau, your clients and your clients’ employees.
- Add your own bureau or firm logo to boost the visibility of your brand and enhance client relationships.
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The two things that our bureau customers really rave about are (1) you are up and running in seconds, as this is all the time it takes to sync all of your client data to the cloud and and (2) you, your clients and their employees can access their payroll information from anywhere, from any device.
Read: Benefits of BrightPay Connect for Bureaus
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Ditch the suit....
Firms are being urged to relax workplace dress codes to help staff cope with the heatwave, the TUC has urged firms to temporarily relax their dress codes and leave work all together if it gets too hot.
The advice will come as a particular relief for male office workers who are often expected to wear shirts, suits and ties to work.
Heatwaves are generally easier for female workers to dress for, as they are able to switch to smart short-sleeved dresses.
It comes as Sunday saw a high of 32C, the hottest day of the year so far and emergency services are on standby after the Government issued a level three amber heat alert as temperatures are set to increase further this week.
Temperatures are due to peak at 34C in certain parts of the UK – hotter than the Bahamas – before cooling down at least a few degrees by next weekend.
As well as allowing comfortable clothes, the TUC has suggested that any outside work is done in the morning or afternoon to avoid the searing heat of the mid-day sun.
The union organisation again called for a change in the law to let workers go home if the temperature reaches 30C or 27C for people carrying out physical work. At present there is no upper temperature limit at which workers have a right to leave work.
It also called for a change in the law to introduce a maximum indoor temperature, with employers obliged to adopt cooling measures when a workplace temperature reaches 24C.
Companies should supply workers with cool drinks and allow them to take regular breaks, advised the TUC.
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Holiday Leave Entitlements
The launch of Labour’s manifesto came with a surprise proposal to increase the public holidays to 12.
If elected, Labour would introduce 4 new public holidays – bringing England, Wales, Scotland and Northern Ireland together to mark all 4 national patron saints’ days. These would be additional to the current statutory holiday entitlement so that “workers in Britain get the same proper breaks as in other countries”. This would mean the statutory holiday entitlement for a full-time worker would increase from 5.6 weeks per year to 6.4.
This proposal along with the time of year we’re heading into makes holidays in general a very topical issue at the moment, so let’s take a look at holiday entitlement and pay:
Entitlement
Employees’ holiday rights start on the first day of their employment.
Under the Working Time Regulations 1998, workers (including part-timers and most agency and freelance workers) have the right to:
- 5.6 Weeks’ paid leave each year, this equates to 28 days for full-time employees
- Payment for untaken statutory leave entitlement on termination of employment
Part-time employees are entitled to the same holidays as full-time workers, calculated on a pro-rata basis.
In addition, employers may choose to include bank holidays as part of a worker’s statutory annual leave.
Pay
The EU Court of Justice has ruled that holiday pay should not be based on basic pay alone - there must be no financial disincentive for an employee to take annual leave. Holiday pay must be the employee’s normal rate of pay and should include;
- Any regular shift allowance should be included.
- Commission: if there is a regular commission structure in place this should be included in holiday pay calculations.
- Overtime: If the employment contract stipulates that an employee must work a set amount of overtime each week then this is included in pay calculations. Regularly worked overtime, although not necessarily included in the contract of employment, should also be included. Irregular overtime should not be included.
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Employing Under 18's - What you need to know
With the summer season upon us many employers will be looking at their summer rosters. Many will start to consider recruiting teenagers for the summer months, others will look to increase the hours of young students currently working weekends and/or evenings. In doing so, employers need to be mindful that specific legislation is in place to protect younger workers which must be fully adhered to.
It is unlawful to employ anyone under the age of 13 at all, except in limited circumstances, e.g child actors, but a permit is required from the local authority. Other restrictions in place in relation to the employment of children are listed below.
Hours of Work
Young workers are entitled to:
- Two days off per week
- A daily rest break of 12 consecutive hours (the break between finishing work on one day and starting work the next)
- A rest break of at least 30 minutes if the working day lasts more than 4.5 hours
Children are not allowed to work:
- Before 7 am or after 7 pm (some exceptions may apply)
- For more than one hour before school
- More than 8 hours a day and 40 hours a week
- Without a 2-week break from any work during the school holidays in each year.
Location of Work
Children are not allowed to work:
- In factories or industrial sites
- In pubs or betting shops
- In any work that may be harmful to their health, well-being or education
Minimum Wage Rates
Workers aged between 16 and 17 are entitled to at least £4.05 per hour. School-aged workers are not entitled to minimum wage.
Annual leave
Annual leave accrues in the normal manner for young workers.
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