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Rolled up holiday pay and workplace pensions


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Macmillan/Welfare Benefits Advisor - Alnwick CAB

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Total Posts: 16

Joined: 24 November 2011

Has anyone had any experience of employers who still use rolled up holiday pay despite caselaw strongly urging employers not to?

We have a local employer who has a mix of zero hour and fixed hours contract staff and they all only get paid for the hours which they work, then every three months they receive an additional amount of ‘holiday pay’.  This is causing some of the staff to earn below the threshold for payments to be made into their workplace pension when they take leave (and therefore don’t get paid during that week) but then they pay more NI and have a deduction made for the workplace pension in the month which they receive the ‘holiday pay’.

Thinking forward when UC full service is introduced in our area next month, this is also going to cause hassle with any UC received by the same employees.

The person who approached CA has not been employed more than two years and is gravely concerned about their job security if they raise the issue, we are thinking of a simple letter to gently explain how using rolled up holiday pay schemes can adversely affect staff including these examples plus how they put employees off using their leave etc.

Anyone got any thoughts on the issue?

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Welfare Rights Officer, Dunedin Canmore Housing Association

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Total Posts: 163

Joined: 25 June 2010

I’ve had personal experience of working part-time on an ‘as-and-when-required’ basis and I’ve experienced both being paid an additional amount on top of my hourly rate in lieu of ‘holiday pay’ and having it paid on an annual basis as a ‘rolled up’ amount.  I know that there’s also been various employment tribunal decisions about how to pay ‘holiday pay’ in these circumstances but I’m not sure what the current position is regarding what’s acceptable.

Having therefore thought about it quite a lot over the years it seems to me that employers might be persuaded that it would be in their interests to offer an hourly rate of pay which includes the ‘holiday pay’ amount as this would be less time-consuming for them.  Working out how much needs to be paid to each such employee every 3 months seems like a huge additional costly task for the employer to me.

Pros and cons to both methods of course - it’s nice to receive a lump sum amount now and again, but not if this is going to affect your entitlement to benefits in a huge way as seems to be the case here.

With regard to the workplace pension issue - I can’t be the only one a bit cynical about whether this will actually benefit the low-paid when they retire?  Unless state pension / pension credit amounts are much reduced or done away with in future of course.

      [ Edited: 18 Oct 2018 at 11:15 am by Mairi ]