Another year is fast passing by and there are three weeks until Christmas. As we usually do around this time of the year, McKone Consultancy would like to remind businesses/employers of their obligations around the Public Holidays and getting pay entitlements right for your people.
There are four public holidays to cater for over the Christmas / New Year period. Christmas Day, Boxing Day, New Year’s Day and the Day after New Year’s.
Depending on your industry you may also have a planned shutdown period.
So how do you ensure people get paid the right entitlements over this period?
Christmas Day and New Year’s Day. This year both Christmas Day and New Year's Day fall on a Wednesday with Boxing Day and the Day after New Year's Day falling on a Thursday.
If you close your business down then the employee's leave is treated as four Public Holidays and, depending on the terms of your employment agreement, the remaining days are annual leave.
If an employee works on a Public Holiday that falls on day they would not otherwise work, the employee does not get an alternative day of leave for working that Public Holiday. They must still be paid time and a half for each hour they work on the Public Holiday.
If any employee who normally works a Wednesday or a Thursday agrees to work on any of the Public Holidays, you will need to pay them at least time and a half for each hour they actually work and also give them a full alternative day's holiday for each Public Holiday worked, regardless of how long they work on the Public Holiday.
You should also check their employment agreement to check that payment for working the Public Holiday is only time and a half (which is the minimum payment). Some employment agreements may provide for a higher penal rate.
To determine the rate of pay for the Public Holidays, the Holidays Act 2003 provides that an employee is to be paid their “relevant daily pay” or, in some situations their “average daily pay”.
Where your employee is salaried and works regular hours, this should a straightforward calculation using “relevant daily pay.” However, where it is impossible or impractical to determine the relevant daily pay, due to the employee working varying hours, the “average daily pay” over the previous 52 weeks can be used.
When it comes to paying employees for Public Holidays, your employees are entitled to be paid for the Public Holiday, however, you should watch out for the following issues:
Consider whether the rate paid includes regular allowances or payments outside the employee’s base rate. These payments may continue to be automatically paid outside the relevant or average daily pay calculation, but if not, they will need to be taken into account as part of the calculation.
Where relevant daily pay applies, consider whether the employee has been paid according to the hours that they are likely to have actually worked (for example, if a waged employee regularly works eight hours at their base rate but then works two hours’ overtime on that particular day of the week, the relevant daily pay payable should reflect this).
Check that your payroll system is not defaulting to a “four-week look back” calculation for relevant daily pay. The Holidays Act used to provide for an averaging formula based on the last four weeks’ gross earnings, but since the average daily pay formula was introduced in 2011, this no longer applies to relevant daily pay calculations.
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