Holiday Pay – how to get it right

General / 25 November 2017
Holiday Pay – how to get it right

Tis the season for holiday pay queries, and we cover tips on public holiday entitlements here.

Cases on holiday pay are increasingly common, with the Labour Inspectorate proactively investigating these and other minimum entitlements and seeking penalties for employers who don’t comply.

It is not a safe option for employers to pay employee holiday pay “as you go” (PAYG), because the employee wants the extra cash in hand.  A recent Employment Relations Authority determination in Cross v D Bell Distributors serves as a reminder that holiday pay can only be paid as you go in certain circumstances.

So when can you pay holiday pay with the employees pay?
The Holidays Act 2003 (HA) only allows PAYG holiday pay where the employee is employed on a fixed-term agreement of less than 12 months or where they work for you on a casual basis that is so intermittent or irregular that it is impracticable to provide them with four weeks’ annual leave, and:

PAYG is specified in the employment agreement; and
Annual holidays is paid at 8% of gross earnings; and
Payment is an identifiable component of pay – eg separately shown on any payslip.
In Cross, the Authority determined that where a regular pattern of work can be established, it is less likely it will be impracticable to provide employees with annual holidays.  Factors that count against work being intermittent or irregular work, include where the employee is rostered on regular work, or where they can show they have worked regularly and consistently.

Despite having had a PAYG arrangement with the employee, in Cross, the employer was ordered to pay the holiday pay again, and additionally was ordered to pay a penalty, because the arrangement did not meet the strict HA requirements.

For advice on paying for holidays, please contact us.

Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.

November 2017

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