Managing employee holidays in your business

Managing employee holidays can be complicated for any business over the summer period, particularly when everyone wants to take time off with the family. Balancing adequate employee coverage so that you aren’t left short-staffed, with the need for your staff to have a break can be tricky. Here’s some advice to help you keep control of employee holidays, which we’ve put together with the kind help of Npower Business:

  • Ensure your employees know how much annual leave they are entitled to. Part-time employees need to have their entitlement pro-rata
  • If bank holidays become a problem, offering extra pay, or a day off in lieu for these dates can encourage your staff to work on them
  • Make your employees aware that they need to book time off in advance. Let them know how much notice period they need to give to book a holiday
  • Limit how many people can take time off at once, especially around the school holidays and Christmas. Make this policy clear so your employees are not left disappointed
  • Put a process in place for when your staff want holiday approved
  • Put up a calendar or timetable of when team members are away so that everyone can see it

 
Holiday Pay

Companies should also remember that since the Employment Appeal Tribunal (EAT) ruling at the end of last year, they need to factor in overtime when calculating holiday pay for their staff. UK workers who are full time are currently entitled to a minimum of 28 days paid holiday per year, based on their normal working hours. Those workers who regularly do overtime are often paid much less when they are on holiday because their overtime or commission is not considered part of their normal pay.

In the cases looked at by the EAT, workers argued that although they consistently worked overtime, it was not included when calculating their holiday pay and, as a result, they received considerably less pay while on holiday compared to when they were working. The employees won their cases and the EAT rejected the companies’ appeals, and said that, for now, overtime should be considered part of an employee’s normal pay. Although the ruling has been put in question by Brexit, as it was based on EU-law, it would be prudent for employers to not make any assumptions about this being overturned.

There were heavy criticisms by business leaders who claimed that it would increase payroll costs and generate a ‘Pandora’s Box’ situation in which employees pursue large claims for underpaid holidays years in the past, potentially putting small businesses at risk of bankruptcy. In response to this, the EAT ruled that employees cannot claim anything more than three months after their last underpaid holiday.

Going forward, employees who regularly work overtime, especially those in the manufacturing and construction industries, can anticipate potentially higher holiday pay in the future. But employers may in turn claw this back by trimming overtime hours to limit holiday pay.