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2017 Rolled-up holiday pay

Holiday Pay for temporary, casual, "bank" or agency employees.

"Rolled-up Holiday Pay"

JACS has had a large number of queries regarding holiday pay calculations under the Employment (Jersey) Law 2003, those employees who only work when work is available (e.g. temporary staff provided by agencies), or who work variable hours or are paid variable rates of pay. The Law provides for a minimum of two weeks paid holiday, or a pro-rata amount where employees do not work a full year. (Employers may wish to consider a zero hours or a variable hours written statement for such employees).  (NB:  Changes to the legislation were introduced from  1st September 2015 in respect of removing the 8 hour threshold for the purposes of calculating length of service and the right to claim for unfair dismissal.  These changes are likely to mean that people working under zero hour contracts are employees and therefore will receive the same rights as all other employees.  However this is likely to only be determined by the Tribunal.)

While it is simple to calculate holiday pay for those who have regular contracted working hours and regular pay rates, it is more difficult to calculate holiday pay when either working hours or rates of pay (or both) vary from week to week. The Law (Articles 13, 14 and Schedule 1) details the calculations that need to be made using 52 week averages in order to determine "normal" hours and "normal" pay rates but some employers see this as administratively burdensome.

As an alternative, employers may wish to consider the option of providing such employees with "rolled-up holiday pay". This facility is recognised by the Employment Forum (in paragraph 1.7 of section 5 of their recommendations to the Employment & Social Security Committee on Holiday Entitlement and Rest Days) where it is stated that such employees may be paid a sum on a weekly or monthly basis which accounts for paid annual leave. That is, holiday pay can be paid each week or month, allowing staff to take a break from work, possibly at the end of their contract or assignment, in the knowledge that they have already been paid any holiday pay that is due to them.

To calculate this sum, it is necessary to know the value of the minimum statutory annual holiday entitlement i.e. 2 weeks per annum. The value of 2 weeks equates with an additional 4% pay for each hour worked. We call this 4% "rolled-up holiday pay" and the calculation can best be demonstrated by working through an example.

A permanent, full time employee:

Such an employee working a 40 hour week and earning £10 per hour would be paid £400 per week.

If this employee worked a full year and received the statutory minimum annual holiday, they would receive 2 weeks paid holiday at £400 per week.

Two weeks paid holiday, at £400 per week, gives a "value" to the holiday of £800 in a full year.

An agency or similar employee:

Based on the "rolled-up" figure of 4%, an agency or temporary employee also earning £10 per hour would have an additional "rolled-up" holiday payment of 4% for each hour worked i.e. £0.40 per hour holiday pay. While the hours worked each week may be variable, for the sake of this example we need to imagine the following. If the agency or temporary employee actually worked a full 40 hour week for 50 weeks a year, then took 2 weeks "unpaid leave", how much holiday pay would they already have accrued?

The answer is that each week, in addition to 40 hours pay at £10 per hour, they would have received 40 x £0.40 (i.e. 4% of £10) "rolled-up" holiday pay, that is £16 per week.

40 x £0.40 = £16 holiday pay per full week of work.

£16 x 50 weeks = £800 per full working year

The value of 2 weeks paid holiday

From the above, it can be seen that the "permanent" employee and the "agency" employee would each have had 2 weeks paid holiday with an annual "value" of £800 or 4%.

In reality, the "agency" employee is less likely to work 40 hours a week for a full year. Irrespective of how many hours the employee actually works, or how much their rate of pay varies (as tends to happen when people work as "temps" for an Agency and work for a number of different clients), provided that they receive an additional 4% over and above their agreed hourly rate for each contracted working hour then they are receiving "rolled-up" holidays and are no worse off than a "permanent" employee who is entitled to the minimum 2 weeks paid annual holiday in a full year. In effect, their holiday entitlement is worked out on a pro-rata basis for each hour actually worked, at the rate of pay that they earn at any given time.

Employers are strongly advised (as emphasised by the Employment Forum) that the facility of "rolled-up" holidays should be provided for explicitly in the written terms of employment. Suitable wording would be:

Holiday entitlement - entitlement is equivalent to 2 weeks per annum as required under the Employment (Jersey) Law 2003. Holiday will be paid for as it is earned on the basis of an additional 4% pay for each contracted hour worked.

All employee's must be given an itemised pay slip on or before each pay period (e.g. week or month) It is strongly advised that the pay slip should clearly identify the value of rolled up holiday pay. For example, if the employee worked 38 hours per week the pay advice would state:

38 hours worked @ £8.50 per hour                              £323.00

38 hours holiday pay @ £0.34 per hour (4%)                  £12.92

Total gross pay                                                         £335.92

Deductions:

Employee's Social Security contribution (X%)                £ 20.15

ITIS (e.g.)  X%                                                              £40.31                  

Net pay                                                                     £275.46

Note: Social Security contribution and income tax deduction should be calculated on total gross pay, so as to include the element of holiday pay. Just because a person is on holiday does not mean that Social Security contribution should not be levied on their holiday pay.

Public and Bank Holidays.

In addition, employees are entitled to paid leave on Christmas Day, Good Friday and on all Public and Bank Holidays. If the employee has been required by their employer to work on such days, then the employee is entitled alternative days off with pay in lieu.

Further advice or information and copies of this and other guidance notes may be obtained from the Jersey Advisory and Conciliation Service in person or by telephoning, or emailing us.

Tel: (01534) 73050; email jacs@jacs.org.je; www.jacs.org.je

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April 2017

 

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