Farmers - Beware of Changes to Holiday Pay Regulations

Farmers must take care to ensure they are paying their employees enough holiday pay, following changes to employment law.

According to accountant Old Mill, the changes mean that employers must take non-guaranteed overtime into account when calculating workers’ holiday pay. “This could significantly increase farmers’ costs, particularly following a busy time like harvest,” says tax consultant Victoria Paley.

Victoria Paley

Old Mill tax consultant Victoria Paley

The changes came into effect recently following a ruling at the Employment Appeal Tribunal in November 2014. “At the time it seemed likely that an appeal would be made but the deadline for this has now expired, so the ruling has become law.”

This means that for the first time non-guaranteed overtime must be taken into account when calculating holiday pay. “Non-guaranteed overtime is where the employer is not obliged to offer overtime but if they do so the employee must work it under their contract,” says Miss Paley.

Since 2004 guaranteed overtime, where the employer is obliged by contract to offer and pay overtime, must also be considered. But voluntary overtime, where the worker may decline requests to work overtime, does not have to be taken into account.

“This ruling is likely to affect the many farmers who require employees to work extra hours during busy periods like harvest and lambing,” says Miss Paley. “However, it only applies if employees take time off within 12 weeks of working those extra hours.”

To calculate holiday pay, employers must take into account the average hours worked in the 12 weeks before the holiday. For example, if an employee worked an average of 60 hours per week over a 12 week period and then takes some holiday, they could be entitled to 60 hours pay for each week of holiday taken.

“Importantly, this additional pay only applies to the statutory four weeks annual leave required by European Law, not the additional 1.6 weeks provided under UK law or any extra annual leave entitlement under an individual’s employment contract,” says Miss Paley.

“Even so, it will place additional financial burden on farmers, not just in the additional pay but also the extra Employer’s National Insurance, at a time when incomes are already under intense pressure.”

Old MIll

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