Holiday pay changes

Historically, holiday pay has been calculated on ‘normal basic pay’ and that’s made sense when the 40 hour week was the ‘norm’. However, in the new world where people are on zero hour contracts, part time contracts with extra hours regularly worked, flexible hours etc it seems sensible for people’s holiday pay to be calculated on the basis of the hours they actually work.
Once, this would have meant a lot of manual record keeping and calculation – but in the days of cloud-based time recording and HR systems, it is not that difficult to give everyone holiday pay based on the hours they actually worked over the previous 3 months.
Equality and flexibility

We have got used to the idea that we need to take proper account of statutory holidays when dealing with part time workers (who once used to miss out on any holidays that fell on days they did not usually work).

The courts have already decided that part time women can compare their pay with full time men who are working the same number of hours.

It is not a big leap of imagination to see that the calculation of holiday pay in relation to hours worked could have similar implications.
It changed earlier 

Holiday pay is no longer automatically calculated on the basis of ‘basic pay’ as British Airways pilots contested this year’s ago and got their flight bonuses included.
Holiday pay changes

Now it seems, from an Employment Appeal tribunal decision that has just been published, that holiday pay can no longer be calculated on the basis of ‘basic hours’ where workers are required and regularly working overtime, but ought to be calculated on ‘normal pay’.
Where will it end?

Wouldn’t it make more sense to simply accumulate holiday pay for each hour worked?   There’s little doubt that the latest decision is going to be appealed to the higher courts.  The legal arguments and the fine distinctions may run on, but it seems that the writing is clearly on the wall for any other method!!

Christmas Party

With the festive season fast approaching, it should be remembered that employers can provide employees with a tax free Christmas party.

The rules apply to any party or similar function, which must be open to staff generally or to workers at a particular location. The tax-free limit applies for a tax year, so an employer can put on both a summer party and a Christmas dinner as long as the total cost for both is less than £150 a head.

The £150 limit includes a whole host of items such as accommodation and transport, not only food and drink. As long as the cost per head stays under the limit, employees can bring their significant others along, and businesses will get tax relief on the total costs.

However, one word of caution; if the business spends even one penny over the £150 limit, the full amount spent will become liable to income tax and national insurance on both staff and the employer alike.  So whilst a Christmas party can be an excellent way of boosting staff morale, making employees feel valued for their hard work over the course of the year, it is important to make sure that you have checked the detail of the cost as there can be no quicker way to eliminate that morale than to come back to work after the Christmas break facing a tax bill for your pre-Christmas frivolities!

One further reminder…the tax exemption applies to an annual event, not to gifts. Employers who want to make Christmas special with gifts to employees should remember that these are taxable. Cash presents such as Christmas bonuses or vouchers redeemable for cash must be taxed and national insurance must be paid through the PAYE system. The alternative for employers who want to give, but without a tax charge attached, is to set up a PAYE Settlement Agreement with their tax office.

 

Enjoy!