Holiday pay – a reminder of the rules Workers are currently entitled to four weeks’ paid holiday per annum (pro rated for those that start employment part way through an employers relevant leave year). It is proposed that the statutory entitlement to paid holiday is to increase to 4.8 weeks on 1 October 2007, and to 5.6 weeks on 1 October 2008. The default holiday year starts on 1 October unless otherwise specified in the employment contract or workforce collective agreement. Employers may provide a contractual entitlement to paid holiday that is more generous than that afforded by statute. The terms of any contractual holiday pay should be set out in the written statement of particulars of employment. A worker is entitled to a week’s pay for every week of statutory annual leave. The method of calculating a week’s pay is set out in the Employment Rights Act 1996, s.221 to s.224. An averaging method must be used where the worker’s remuneration varies from week to week. Holiday pay in advance, where the worker receives their normal weekly wage plus the appropriate number of weeks holiday pay on the last pay date before their holiday requires the application of special procedures in calculating PAYE and NIC liabilities as per CWG2 Manual, Chapter 2. Payment should be made at the time when the leave is actually taken. The practice of ‘rolled-up’ holiday pay, where payments are spread throughout the year into a worker’s wages has been held by the Courts to be unlawful, so contracts containing any such clause must be renegotiated. Workers on long-term sick leave having used up their sick pay entitlement cannot give their employer notice to take four weeks’ paid statutory holiday. However, this issue is still ongoing and has been referred to the European Court of Justice for a definitive ruling. Paul Tew, Pay Magazine Snowdrop provides a range of Payroll solutions that are fast, flexible and easy-to-use, to suit the many and varied needs of each organisation. To find out more about the software and services that we provide, please click here >>