Farmers with staff who work overtime, such as during harvest, could find themselves with bigger bills for holiday pay after a change to employment law.
The new legislation means employers will have to calculate holiday pay based on more than basic pay, to take into account “non-guaranteed overtime” (where an employer is not obliged to offer overtime, but if they do, the employee must work it under their contract).
Victoria Paley, tax consultant at accountant Old Mill, said: “This could significantly increase farmers’ costs, particularly following a busy time such as harvest,” said Miss Paley.
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“It will place additional financial burden on farmers, not just in the additional pay but also the extra employer’s national Insurance, at a time when incomes are already under intense pressure.”
How holiday pay will be calculated
Employers will have to calculate holiday pay in this way only if employees take time off within 12 weeks of working extra hours.
Miss Paley said this meant if an employee worked an average of 60 hours a week over 12 weeks before a holiday, they could be entitled to 60 hours pay for each week of holiday taken.
When to apply the calculation
Since 2004, guaranteed overtime, where the employer is obliged by contract to offer and pay overtime, must also be considered.
But voluntary overtime, where the worker may decline requests to work overtime, does not have to be taken into account.
“Importantly, this additional pay only applies to the statutory four weeks annual leave required by European Law, not the additional 1.6 weeks provided under UK law or any extra annual leave entitlement under an individual’s employment contract,” said Miss Paley.
The change to legislation comes following an appeals tribunal at the end of last year.