Client has an employee who is paid hourly and contracted to work 20 hours a week, she often works over the 20 hours. She's taken a week off and is under the impression we should be averaging her hours over the last 12 weeks and paying her that amount of hours.
My understanding is that she would get 20 hours holiday pay, being 1 week of her 5.6weeks. The overtime she does is optional and therefore holiday is not accrued.
The only line in the contract is:
"Your holiday pay will be based on your average earnings over the previous 12 weeks"
I understand that to be related to the hourly rate, so that if they were for example on time and a half for evening shifts, so had varying rates of pay in a week, that would be averaged out to give an hourly rate, or if they'd had a payrise. But as she is paid the same amount per hour, this is not relevant.
Interested to hear how other people would treat this one!
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Holiday Pay
I personally would average it out as she is expecting. Various additions nowadays have to be included. Cant remember whether extra overtime counts. Would have to look it up.
I think the statement in contract is most ambiguous. When I read it just now I took it as the employee has taken it. It should read that the "HP will be based on the average hourly rate."
Thirdly, I would rather pay an have a happy employee rather than one who could potentially argue and niggle over that
How many hours are we talking about?
Actually in my opinion it doesn't really affect the answer how many hours...
If the overtime hours are small then why not just pay the average, for the sake of a happy employee and good employee relations?
If the overtime hours are many, then it seems abusive to not pay the employee holiday pay based on the actual amount of work that they regularly do rather than their contracted hours.
Furthermore if I were an employee I would regard the statement "Your holiday pay will be based on your average earnings over the previous 12 weeks" as an extremely clear specification that holiday pay is based on the average of the hours and pay actually worked, not the contracted hours.
clear
"Your holiday pay will be based on your average earnings over the previous 12 weeks"
That's not ambiguous. Where is the argument against it?
Seems clear to me
Average earnings per week is a monetary total for the week - nothing to do with an hourly rate.
I don't see how anyone could interpret this in any other way.
"But as she is paid the same
"But as she is paid the same per hour, this is not relevant."
But the hourly rate is not the only variable in her case is it?
What would be the point of the clause
... unless the hourly rate changed frequently. The clause says it is based on average earnings.
This is relevant: http://www.cipd.co.uk/pm/peoplemanagement/b/weblog/archive/2014/11/06/ho...
But the contract is also important and is pretty clear ... "average earnings". Not average earnings restricted to basic pay. Not average earnings excluding overtime. Just average pay.
Whilst mentioning pay, it pays to get a professional to draw up your employment contracts. It ensures your intentions are met and there is no ambiguity.