In 1926 Henry Ford introduced the 8 hour day and the 5 day working week because he realised that employees who rested were more productive. The same applies to employees and annual leave.
Some employers see holiday pay as another tax however, it is really important for employers to understand that holiday pay is not all about the money!
Holiday pay is about Health and Safety. It is there to encourage workers to take adequate rest breaks. This will in turn help your business by having healthier workers who are more productive because they are less tired and staff who make less mistakes because they are less tired.
The Law governing holiday pay in the UK is the Working Time Directive which was introduced in 1998. The Working Time Directive provides instructions and rules as to how many hours employees should work, when they should work and how much holiday they are entitled to.
Most employers now understand that full-time employees in the UK are entitled to a minimum of 28 days holiday within a year but there are still many employers that are making a BIG mistake.
That mistake is paying workers holiday pay in advance of the holiday being taken. This is prevalent with those employers who have staff on zero hour contracts. It is a practice known as ‘rolling up holiday pay’ where the worker will receive an enhanced rate of pay in lieu of holiday.
For example a worker who is over the age of 25 must receive a minimum of £7.50 per hour. A worker who is over the age of 25 receives an enhanced rate to include holiday pay will receive £8.41 per hour.
The problem with this is that the worker is less likely to take holiday because they will fear being without wages. In 2005 a Judge confirmed that this practice is unlawful and that holiday pay should be paid for at the time when the employee actually takes holiday.
The recent case of British Gas v Lock 2016 reminded us that employers should not be doing anything which might discourage workers and employees from taking annual leave. It was also another example of how not paying holiday pay correctly can lead to a lengthy employment tribunal case.
So remember, holiday pay is not only about the money. It is a health and safety matter and it makes your workers more productive.
If you currently pay your staff an enhanced rate and you would like some assistance renegotiating the contract please contact Orchard Employment Law by visiting http://www.orchardemploymentlaw.co.uk/contact