VAM Holiday Payments

1. VAM Holiday Payments June 2014

2. So why do we have to have separate holiday pay entries? Rates of pay which include a holiday element are unlawful… "Rolled up" holiday pay is the practice of not paying the worker for their annual leave at the time that the leave is taken, but incorporating an element relating to holiday into their hourly rate. This method of paying for holiday is convenient for employers, especially where a worker's hours of work and pay vary during the year (casual, agency, temporary workers). However the practice was criticised as often workers did not take their actual holiday entitlement. Historically the practice has had mixed feelings; • the English Courts generally accepted "rolled up" holiday pay providing certain safeguards were in place, • the Scottish Court of Session ruled the practice unlawful, • the European Advocate General felt the system could be acceptable provided there were steps to ensure workers actually took their holidays. In March 2006, following a reference to the ECJ (European Court of Justice) the ECJ held definitively that the practice of paying "rolled up" holiday pay was unlawful.

3. How is the amount calculated? (lump sum amounts) First confirm whether the payment includes or excludes an amount for holiday pay. If the amount to be paid does not include holiday pay then the holiday pay amount is 12.07% of the amount to be paid. Example Cash sum £500.00 (does not include holiday) Holiday Pay £60.35 (£500.00 x 0.1207 = £60.35) Total to be paid £560.35 (£500.00 + £60.35) If the amount to be paid includes holiday pay then the amount to be paid must be reduced by the holiday pay amount. Example Cash sum £500.00 (includes holiday) Revised Cash sum £446.15 (£500 ÷ 1.1207 = £446.149 rounded) Holiday Pay £53.85 (£500.00 – 446.15 = £53.85)

4. How is the amount calculated? (hourly paid) First confirm whether the rate includes or excludes an amount for holiday pay. If the rate to be paid does not include holiday pay then the holiday pay amount is 12.07% of the rate. ExampleHourly rate£10.0000 per hour (does not include holiday) Holiday Pay £ 1.2070 per hour(£10.00 x 0.1207% = £1.207) Total to be paid £11.2070per hour (£10.00 + £1.1207) If the rate includes holiday pay then the rate must be reduced by the holiday pay amount. ExampleHourly rate£10.0000per hour (includes holiday) Revised hourly rate £ 8.9229 per hour (£10.00 ÷ 1.1207 = £8.92299) Holiday Pay £ 1.0771 per hour(£10.0000 – 8.8229) Remember that the hourly rate can never drop below the National Minimum Wage (NMW) which is currently £6.31 per hour (£6.50 per hour from October 2014).

5. Things to remember • Every payment should be made up of two separate entities – a payment or hours & holiday pay. • Every payment made is subject to holiday pay (equivalent to 7.272 minutes for every hour). • There is no requirement to holiday being taken as hours.  Instead holiday payments should be submitted as lump sum cash amounts.  • If you really want to then the lump sum holiday amount can be shown as 1 hour @. • VAM hourly rates which equate to a spinal point never include holiday therefore holiday pay should be added on top. • Hourly rates, regardless of whether they equate to a spinal point or not, can never be reduced below the National Minimum Wage (NMW) which is currently £6.31 (rising to £6.50 from October). Example a rate of £7.00 can never include holiday £7.00 ÷ 1.1207 = £6.25 (£6.25 x 1.1207 = £7.00).

6. Where to get help VAM Holiday Pay web page www2.warwick.ac.uk/services/humanresources/payroll/payguidproc/vamholiday The Payroll Team… Payroll Manager Tal DhaliwalExt 22721 T.Dhaliwal@warwick.ac.uk Deputy Payroll Manager Stuart Threlkeld Ext 22021 S.Threlkeld@warwick.ac.uk Payroll Supervisor June Williamson Ext 51385 J.L.Williamson@warwick.ac.uk Payroll Co-ordinators Linda Soar Ext 22718 L.D.Soar@warwick.ac.uk Lovey Chima Ext 50218 l.k.chima@warwick.ac.uk Dee Mistry Ext 28019 Dee.Mistry@warwick.ac.uk Charlotte Pearson Ext 22724 C.L.Pearson@warwick.ac.uk