Over 1.1 million employees denied their holiday pay rights

New analysis shows more than a million employees didn’t get any of the paid holiday they were entitled to last year – with BME employees hardest hit

TUC

• Union body says failures on labour market enforcement have allowed bad bosses to exploit staff  
• TUC launches its “five-point plan for enforcement” as new polling shows “huge support” for better enforcement from voters across the political spectrum
• And the union body says government’s Fair Work Agency could bring enforcement bodies together with “real teeth” to “finally hold rogue employers to account”

Workers across the UK are being “cheated” out £2 billion worth of holiday pay.

UK workers are legally entitled to a minimum 28 days paid leave for a typical five-day week, with pro-rata entitlement for those who work fewer than five days.

Research by the TUC shows that 1.1 million employees (1 in 25 employees) did not get a single one of the 28 days’ paid holiday, or equivalent, they were entitled. These missing weeks add up to £2 billion in lost holiday pay – or on average £1,800 per affected employee.

BME workers and low-paid hardest hit

The research also shows that Black and minority ethnic (BME) staff were hardest hit – 6% of BME employees did not get any paid holiday last year, compared to 4% of white employees.

And low-paid workers were most at risk of losing their paid holiday entitlement. The jobs with the highest numbers of staff losing out were waiters and waitresses (59,000), care workers and home carers (55,000), and kitchen and catering assistants (50,000).

Millions missing out on key employment rights  

In addition to holiday pay, the TUC claims millions of workers are missing out on many other basic employment rights due to a lack of enforcement.

Recent analysis from the government’s Low Pay Commission found that 365,000 workers are underpaid the minimum wage – more than one in five of all workers on the wage floor.  

1.8 million do not receive a legally required payslip

And the Resolution Foundation also found hundreds of thousands of workers have been shut out of basic rights like access to their payslip (1.8 million) so can’t check if they are being paid correctly, and not auto-enrolled into a workplace pension scheme (600,000) when they should have been.

600,000 not placed into workplace pensions

The main reasons people are missing out on paid holiday are:

• Workplace cultures where workers fear that requesting paid time off could lead to being treated unfavourably.
• Workers being set unrealistic workloads that do not allow time to take leave.
• Employers deliberately denying holiday requests and managing out people’s leave.
• Employers not keeping up to date with the law.

Five-point plan on enforcement

To address this enforcement crisis, the TUC has launched its five-point plan for effective enforcement of employment rights in the UK.

Decent employers are undercut by those that don’t meet their legal duties.

It claims that workers are currently losing out on wages and other key entitlements, while decent employers are undercut by those that don’t meet their legal duties.

The TUC report supports the new Labour government’s pledge to introduce a Fair Work Agency bringing together several existing state enforcement bodies. It calls on ministers to:

• Create a properly resourced single enforcement body with a strong union voice in its governance structures.
• Recycle fines back into the enforcement system.
• Increase the number of inspectors and inspections.
• Extend the licensing scheme to new sectors.  
• Build international links and create a firewall with immigration enforcement to crack down on the exploitation of migrant workers.  

The Fair Work Agency

As part of the Employment Rights Bill, Labour has pledged to create a new Fair Work Agency – a single enforcement body with power to crack down on bad employment practices, uphold rights at work and level the playing field for good employers who follow the rules, to ensure people are treated fairly at work.

TUC polling of more than 3,000 voters – conducted by Opinium on the day after the election – showed large-scale backing across the political spectrum for Labour’s Fair Work Agency. More than six in 10 (61%) voters support introducing a single enforcement body to make sure that workers’ rights are properly enforced – with less than one in 10 (8%) against.

The TUC say that Conservative voters support the policy by a margin of around three (50%) to one (17%), and there is even more support for the Fair Work Agency amongst Reform voters (53% to 13%).

On the need for the new government’s Employment Bill and Fair Work Agency:

“Now it’s time to reset the dial…..

“This week at Congress we will be debating how we can drive up standards at work. These shocking findings show why we need the Employment Rights Bill and the Fair Work Agency.

“Working people deserve to be treated fairly and have a minimum floor of rights upheld.

“And there is huge support from the public – right across the political spectrum – for this.”

On the need for a level playing field, Paul added:

“Good employers have nothing to fear as they’re already playing by the rules.

“Now it’s time to level the playing field.

“Labour’s Fair Work Agency must have real teeth and hold rogue employers who think they are above the law to account.” 

Want to know more about holiday pay right?

All employees and workers have rights to paid holiday. Previously all were entitled to a statutory minimum of 5.6 paid weeks holiday. 4 weeks under EU regulations which are adopted into UK law as part of the Working Time Regulations under regulation 13, and a further 1.6 paid weeks under UK law under regulation 13a.

These even applied to zero hours workers, part time workers and casual employees.

PAYadvice.UK publish resources for employers and employees on holiday entitlement and pay which link to articles and associated legislation which outline the rights.

Some employers believe they can contract away these employment rights – that would be unlawful.

Holiday pay is required to be paid using the normal weekly pay amount. For any proportion of leave being taken that normal equivalent proportion of a week applies to determine the pay.

Inclusion of all pay elements that form normal regular pay such as commission and overtime pay form part of the normal weekly payment.

52 paid week earnings average (12 weeks Northern Ireland)

For employees whose pay varies from pay period to pay period, when taking a proportion of holiday leave, the pay is required to be made on the basis of an average to enable calculation of the normal weekly earnings, sometimes referred to as Average Holiday Pay (AHP). This is one of the expertise areas of PAYadvice Ltd.

In Great Britain it is based on the prior 52 paid weeks average excluding zero pay weeks. For weeks excluded the average must take a further paid week going back up to 104 calendar weeks (2 calendar years). If there are not enough weeks then use the number of weeks there are.

For Northern Ireland, the average is based on the prior 12 weeks.

What about monthly paid

The law unfortunately does not cater for monthly paid employees (although the majority these days are not weekly paid). Employers need to choose a pragmatic method which meets the spirit of the 52 paid week average required. For example, some may take the prior 12 month pay and divide by 52 for the weekly average. In NI they may take the prior 3 months and divide by 13 weeks. Neither is exactly aligned with regulations, however, they may be justifiable as a pragmatic approach to reflect a fair weekly average for paying holiday pay and AHP.

What about the 1st April 2024 changes

New revised regulations can be chosen to be operated by employers for those they can classify as irregular or part-year workers only for holiday years starting on or after 1st April 2024. They are not lawful for any prior holiday years.

The two new methods are:

• Holiday Accrual
• Rolled-up Holiday Pay (RHP)

The new calculations permitted include protections and added holiday rights to cover sickness and statutory leave such as maternity. Prior unlawful schemes often provided no protections.

For more details of the new methods PAYadvice.UK publish an article New Holiday Pay 12.07% – not as easy as you think!

How many employers get holiday pay wrong?

Holiday pay law is complex, however, it is also possible to comply when using some base principles.

UK payroll professionals pride themselves on the principle of accuracy and on-time. However, a sizeable number of employers get holiday pay wrong. It would be good to try and claim that large employers get it right, unfortunately the reality is different, and many large employers also get it wrong. This also affects those who fall into the public and private sectors. Error is common.

The means of rectification by an employee is to take the employer through to tribunal which may feel onerous.

Of course, simplification may help, however, many employers fail at the first hurdles of even understanding some of the basics of the requirements of the Working Time Regulations alongside the Employment Rights Act.

Some professionals can even show an element of arrogance in their ignorance of the regulations and its implications relying on out dated legal advice and company practices that pre-date even the original Working Time Regulations.

What are the potentials with a single enforcer

At the moment employers have limited to little fear of being pursued on holiday pay rights as resolution is often localised within the employer cooperation with a limited number of cases reaching a tribunal.

However, enforcers are different. With National Minimum Wage, all complaints are taken seriously and eventually investigated. The risk for employers is the scope, as the actual single complaint is not solely investigated, but a more general audit of the employer rules and practice. Where breach is found the the employer is forced to correct all cases identified along with facing penalties and fines.

As holiday pay compliance is so poor, will there be significant risks for employers on enforcement activity?

It’s time for UK employers to review their holiday pay policies and implement change to ensure employees and workers do receive their correct and entitled holiday pay rights.

Holiday pay resources

For holiday pay resources see:

PAYadvice.UK 8/9/2024 updated 12/9/2024