Farmers who employ staff are being put under increased financial strain by a series of new legal requirements that are leading to higher wage bills.
John Thame, partner at accountants Ellacotts and chairman of the UK200Group’s agriculture industry group, said farmers were facing a “perfect storm” due to changes in calculating holiday pay that have applied since July, an increase in the National Minimum Wage from 1 October and the need to auto-enrol employees into a pension scheme.
“It is easy to think of rural enterprises with few staff, and therefore able to somehow bypass this legislative change,” he said.
The overtime calculation
For a number of years employers have had to take into account guaranteed overtime in the calculation.
The change in the legislation means that non-guaranteed overtime also needs to be included.
This is overtime which a worker is required to work, but which an employer is not obliged to offer.
There is no case law that suggests voluntary overtime needs to be taken into account.
“In a sector where there are particularly busy times and therefore overtime, hikes to holiday pay can significantly increase farmers’ costs when income is already burdened with employees able to backdate claims for up to two years.
“The challenges are suddenly coming in multiple directions at once and it feels like a perfect storm.”
The UK Employment Appeal Tribunal ruled in November 2014 that workers’ holiday pay needs to reflect all overtime payments (see right) in addition to basic pay.
Previously, only basic pay and any guaranteed overtime was counted when calculating holiday pay.
Mr Thame said that technically employers only had to take into account overtime on the first 20 days of holiday, as the ruling only applied to the four-week statutory element of an employee’s holiday pay.
However, in practice many employers would probably choose to pay it across the full 28-day holiday period to avoid an administrative headache.
Mr Thame added where hours and earnings varied, for example over the harvest period, the holiday pay calculation should be based on an average of the overtime completed in the 12 weeks prior to the holiday being taken.
Lee Osbourne, NFU employment policy advisor, said the union was pushing for employers to be given the option to average overtime payments across the year, rather than 12 weeks, in order to even out peaks after busy times such as harvest.
“We’d like to see greater flexibility so people can average over 12 months. We’re pushing for this.”
The UK200Group is an association of independent chartered accountants and law firms.