New UK holiday-pay record rule tied to minimum wage is in force and proving complex for employers

The useful part

Oscar Wong via Getty Images) Businesses in Britain could well be struggling with a new "onerous responsibility" over holiday entitlement and pay compliance, it emerged this week. The issue follows the government's April 6 introduction of the Fair Work Agency and new rules, business experts have said. Employers now have to maintain holiday entitlement and pay records and keep them for six years, in line with National Minimum Wage records.

How it works

• The principle is simple, but the working reality is somewhat more complex, says Hannah-Jane (H-J) Dobbie, head of HR consultancy at Azets, a UK top 10 accountancy and business advisory firm.
• ‌ A Fair Work Agency spokesperson said it would support companies and help them to comply with the rules before considering any enforcement action.
• She warned this is not the case when it comes to workers with fixed hours but variable pay.
• ‌ She added: "For example, if they regularly work overtime, receive allowances or commission or are paid shift premiums.
• The calculation for these workers, based on the 'calendar method', is so complicated that employers often don't know where to start.

What to take from it

By identifying risks early and improving compliance, we aim to prevent problems before they arise while taking firm action where necessary. We encourage businesses to review pay, working time, deductions, agency worker arrangements and record keeping, and to address any issues before they escalate." ENJOYED THIS STORY? ‌ Records must contain annual entitlements, when leave is taken and what employees are paid for each period of leave, including any pay in lieu of holiday upon termination.

Example or evidence

• Government research highlighted the scale of the issue: 900,000 UK workers annually have holiday pay withheld, worth £2.1 billion, and nearly 20% of minimum wage workers are underpaid.
• "What has come to light is that employers do not understand the calendar method or how to calculate holiday pay correctly.
• We are identifying underpayments where workers have not had variable pay components, such as regular overtime, shift premiums, etcetera, included in their holiday calculations.
• "Employers are in a state of panic as they don't know how much will be owed to employees when the extent of the underpayments is known, especially as they may have to go back as far as two years to make...

Details worth keeping

What's more, they are terrified that the new Fair Work Agency (FWA) will impose hefty fines or open criminal investigations for worker exploitation even though they are trying to do right by staff. It wouldn't be an overstatement to say that thousands of businesses, particularly smaller ones without experienced HR and payroll teams, are struggling with the concept of the paperwork that is required to comply." Hannah-Jane Dobbie (Image: Newspage) ‌ Many workers are paid monthly, but the calculation has to be done weekly.

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