The right of employees to paid annual leave may cost your business more than you thought.
This week the Police Service of Northern Ireland (PSNI) confirmed its decision appeal the ruling that could see it pay almost 4,000 staff up to £40 million in unpaid holiday pay.
If the PSNI lose the Supreme Court appeal (the final step in the appeal process), it could face a bill for unpaid holiday pay dating back to the commencement of the Working Time Regulations (Northern Ireland).
In case you’re wondering, that was November 1998…
Paid annual leave to include overtime
The Court of Appeal ruled that paid annual leave should include overtime provided the overtime worked is regular (reflected in each pay period or shown in each payslip over the previous 13 weeks to 12 months).
Pay reference periods may vary
Calculating overtime can lead to its fair share of headaches. An added pain point is that pay reference periods for each individual employee may vary.
Let’s try to make sense of it all and skip the jargon shall we? If an employee works regular overtime, a 12 week reference period should be suitable.
On the other hand, if certain employees work overtime during certain periods only, the pay reference periods change. If for example, an employee works overtime between July and August, their pay reference period is likely to be 12 months.
Is your business affected?
It all depends on the PSNI case. The result could have a big impact on the payrolls of employers across Northern Ireland, so right now it’s a waiting game.
Until the Supreme Court hands down its decision, you won’t owe any unpaid holiday pay to employees. In the meantime, it may be worthwhile auditing your payroll to see if your employees would follow the lead of the PSNI staff.
If your business pays employees overtime on a consistent basis, a payroll audit is recommended.
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