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As mentioned in our previous article, the Government established a taskforce earlier this year to conduct a review of the Holidays Act 2003 (Act).

The taskforce has now released an issues paper for public consultation. It has identified the issues to resolve as part of its review and invites further comments and submissions by 12 October 2018.

Many employers struggle with the current Act’s lack of guidance on how minimum entitlements are to be provided for in different working situations. Calculations can be straightforward for employees working a standard, five day, 40 hour week. However, difficulties arise in cases of flexible or variable work practices where an employee works unpredictable hours or receives variable pay, such as commissions.

This is highly problematic because employers are generally unclear on what calculations they should be using depending on an employee’s working arrangements. Knowing what formula to use requires good knowledge and understanding of the Act, as well as correctly configured software if using payroll systems.

Key issues highlighted by the paper include:

What payments are included in an employee’s ‘gross earnings’ and ‘ordinary weekly pay’
Calculating ordinary weekly pay and average weekly earnings, including when it is not possible to use the formula for ordinary weekly pay
Definition of an ‘ordinary working week’ and an ‘otherwise working day’
Determining when and which averaging formula (Relevant Daily Pay, Average Daily Pay, Average Weekly Earnings or Ordinary Weekly Pay) should be used
How to treat sick and bereavement leave arising while an employee is taking annual holiday
Defining what a ‘week’ is
‘Intermittent or irregular’ employment and ‘pay as you go’ holiday pay; and
Various complexities which create complications for payroll systems and lead to non-compliance with the Act
Changes are not expected until mid-2019. In the meantime, incorrect calculations cannot be excused by the complexity of the current Act or ignorance of the law, and the Labour Inspectorate is regularly reviewing compliance with the Act and pursuing claims, including penalties, against employers who do not meet requirements.  The liability risk for incorrect payments is significant at six years, the current limitation period for claims, and identified risks are increasingly a feature of audit reporting.  If you are unsure about an employee’s holiday entitlements and payments, our team can assist you.

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.

September 2018