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Employers Face Paying More When Workers Take Leave

Written by: Keith Tully

Reviewed: Monday 8th June, 2015

Employers across the European Union have been told that they should always pay members of their workforce at typical levels while they take annual leave.

A ruling to that effect is being ushered into law across the continent with scores of recruitment firms and round-the-clock care providers among those likely to find themselves paying additional sums to staff who might otherwise only be entitled to basic pay while on holiday.

The new laws could also be good news for financially incentivised salesmen and women across Europe or anyone who typically earns a percentage of their pay on the basis of commission.

Last year, European courts decided that anyone who works shifts or partly for commission should continue to be paid at the same levels as they ordinarily would while taking annual leave they’re entitled to.

The decision laid the ground for it to become unlawful for employers to only pay basic salaries to members of their workforce whose holiday pay is usually lower than their typical earnings.

Hefty fines could now be issued to companies that don’t adjust their employment policies in light of the EU ruling, with businesses in the UK and elsewhere being urged to look closely at how they pay their staff during periods of paid leave.

“Employers now have to give consideration to what the employee would likely have earned when they are on annual leave; calculating what they would have earned if that same employee was doing the same job in that time period,” explained Donald MacKinnon from the legal service firm Law at Work.

“This means that each employee’s pay record should be reviewed for at least the twelve weeks before the annual leave period to calculate what the average pay was for a week. This will then help calculate what the new holiday pay per day would be for that individual employee,” he said.

The rules being introduced are designed to apply regardless of the industry or the type of work being undertaken in order to create what European rule-makers consider to be fairer employment structures across the EU.

Ultimately, it is hoped that individuals who work partly for commission or night shifts to earn extra money, or on the basis of low-hours contracts, will no longer be deterred by the nature of their salary structures from taking holidays as they are entitled to.

However, for many employers there is clearly work to be done to figure out exactly how to pay staff who take time off as holidays and whose pay packets are usually worth more than their basic salaries.

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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