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Payroll can anyone advise please?

Payroll/SMP/Holiday Pay/Leaver - I now have brain fog

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Good Morning all, I am hoping someone can relieve me of my brain fog as I'm either not explaining the accrued holiday pay/maternity pay to a leaver or I have the wrong end of the stick. Yes how lucky am I to get all this in one sitting?!

I process a payroll for a pre-school - term times average 38 weeks - holiday pay using the 12.07% method is added to their gross for the year  - I then divide their annual total by 52 weeks as they are paid every week.

So I now have a young lady coming to the end of her SMP who has given her notice but is arguing with me that she has accrued holiday pay whilst on maternity leave. I've explained that holiday pay had initially been added to her gross but she doesn't get it - or is it me who's not getting it?

Any advice greatfully received. Thank you

Veronica

Replies (12)

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By paul.benny
19th Aug 2019 10:39

You seem to be rolling-up holiday pay into your weekly pay. This is no longer permitted - see https://www.gov.uk/holiday-entitlement-rights/holiday-pay-the-basics

Notwithstanding that, the employee has accrued holiday pay during her maternity leave and is entitled to be paid it.

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By Sandnickel
19th Aug 2019 12:23

Have you actually paid the holiday pay to her each week or have you just paid her SMP? She will accrue holiday as the previous poster mentioned.

I would work out how much she is entitled to and how much holiday pay she has actually been paid and show her the calculations.

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By Veronica J
19th Aug 2019 12:58

Oh thank you both so much. Re the rolled up figure, the holiday entitlement is added to their contracted figure, e.g. working 31.667 hours for 38 weeks x 12.07%, which is added to gross weekly - then spread over 52 weeks.

With SMP having been paid for the 14 weeks the school has been closed, does that not count towards holiday pay?

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Replying to Veronica J:
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By paul.benny
19th Aug 2019 13:14

Counting mat leave as 'work', how many weeks' holiday has the lady earned?
How many weeks' holiday has she taken?
The difference is the amount of holiday she is owed.

Schools require employees to take holiday at specific times. I don't know whether those mandatory holidays can be treated as holiday when someone is on maternity leave. I would suggest asking acas that specific question. They have a free helpline.

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Replying to Veronica J:
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By legerman
19th Aug 2019 13:21

Veronica J wrote:

Oh thank you both so much. Re the rolled up figure, the holiday entitlement is added to their contracted figure, e.g. working 31.667 hours for 38 weeks x 12.07%, which is added to gross weekly - then spread over 52 weeks.

With SMP having been paid for the 14 weeks the school has been closed, does that not count towards holiday pay?

You can't add holiday pay to the salary, it has to be accrued separately then paid when requested by the employee when they take a holiday. It works out exactly the same but rolled up pay, which is what you're doing, was abolished in 2008. They still accrue holiday whilst on maternity pay.

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By SXGuy
19th Aug 2019 20:58

It's a shame really because now you'll have to re work everyone's pay and calculate what holiday their all entitled to and what they have already had.
And the leaver gets whatever is owed up to the point they left.

The hardest part is breaking the news to all staff that they have just got a pay decrease and won't get it back till there allocated holiday time.

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By pauljohnston
21st Aug 2019 11:53

RE Paul Benny comment that you cant roll up please see working examples at https://www.gov.uk/government/publications/calculating-holiday-pay-for-w...

This working example brings in the 12.07% back into play. Indeed I cant see any other way of dealing withit. The other examples expect some sort of regularity but if you have a person who works only when you need them or only when they want to work the examples excluding the 12.07% dont work.

My example above may cover a married women with children and may be a second job. If the children are sick or off school for another reson inc holidays and training days the Mum cant work other days to catch up.

Well done policitians both in the UK and EU for not thinking the problem thoroughly.

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Replying to pauljohnston:
By Duggimon
21st Aug 2019 12:16

Holiday entitlement for irregular workers is calculated using the 12.07% per the examples you quote.

Paul Benny's comment doesn't contradict that, merely points out you can no longer roll up the entitlement into gross pay, which is quite right.

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Replying to pauljohnston:
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By paul.benny
21st Aug 2019 15:26

The guidance quoted has a specific illustration for term-time only workers. The approach varies according to the nature of the employment contract.

Holiday pay is complicated for people with irregular working patterns and hours. But at least every employee has an entitlement to paid holidays.

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Replying to pauljohnston:
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By psimonparsons
21st Aug 2019 15:55

I’m a bit lost, where does this illustrate 12.07 being acceptable. Case law 6 indicates it is not and 12 week earnings average is required. Have I missed something. As far as I can tell the 12.07 has been dropped. And accrual only applies to enable an entitlement calculation for the first year. Tending to think the employee in this example is correct. And as previously indicated, rolled up holiday payments are illegal.

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By Hut15
22nd Aug 2019 11:07

I used to deal with a nursery so I used a similar calculation to you. It is not illegal, because the employees are receiving the correct amount of paid holiday AND sufficient leave (thankfully no one had a baby). Rolled up holiday pay is illegal where it is paid instead of giving paid leave. In your case it is no different than many companies where you are paid the same salary every month and holiday pay is not tracked. Someone somewhere makes sure the correct amount of leave is taken so it all works out in the end.

The maternity pay complicates it slightly, though. Your employee would be correct that while she is on maternity leave she is not getting holiday pay IF her maternity pay wasn't already grossed up for holiday pay. I think you need to run a calculation of what she would have been paid before grossing up, calculate the maternity pay on that un-grossed up amount, calculate how much holiday she has accrued, up to the leaving date, deduct holiday she has already been paid for, and arrive at a final figure.

Just running through the calculation will help you to see it clearly and provide figures to give to your employee.

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By Veronica J
23rd Aug 2019 11:00

Thank you all so much for your comments. I took a chill pill for a few days to recover. So to update... after speaking to lovely lady at ACAS she confirmed that no provision in place by HMRC regarding school/nursery payrolls such as this. Also that adding holiday to gross was okay as staff are aware and understand how it is calculated.
Now all I need do is work out how much holiday pay she has received between September & mid December, mix in with that a payrise they had in April.
At the end of ACAS call (9.30am) I thanked the lady & said she deserved a nice cup of coffee after all that (she had to confer a few times on this saga). She said she needed a gin !

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