Consultation marks countdown to holiday pay crackdown as RSM UK finds over half of employers are open to errors
As the government launches its consultation on holiday pay enforcement, ‘Make Work Pay’ RSM UK says many employers are likely to be making mistakes on holiday pay rates.
RSM’s recent Workforce Survey found over half (56%) of businesses pay all types of holiday pay at the same rate, suggesting many could be making errors that leave them at risk of enforcement action by the Fair Work Agency from next year. While 61% of employers said they use bespoke software tailored to their workforce to calculate holiday pay, a third (33%) relied on their software’s default settings, and one in ten (11%) calculate it manually, an approach which is likely to result in mistakes.
Chris Robson, Employment Tax Partner and Fair Pay Lead at RSM UK, said: “This consultation is a signal to employers that they need to look at holiday pay in much more detail now to ensure they get it right and avoid enforcement action. Holiday pay can be a very complex area to get right, and the buck stops with the employer, regardless of what third party payroll providers or software systems may be used.
“Whereas many have in the past relied on default software offered, employers now need to consider what the new rules are and how these apply to their workers. This could be wide and varied, depending on the wording of contracts, their working patterns, elements of pay, and whether they are permanent, temporary or contractor staff.
“While initial enforcement is not anticipated to be as hard hitting as the current National Minimum Wage (NMW) enforcement, we anticipate the Fair Work Agency will likely mirror the approach taken on enforcement of the NMW, with large fines and public naming of employers that are found to be in breach of the rules.”
Chris Robson concludes: “We’re encouraging all employers to check their holiday pay systems and processes to ensure full compliance ahead of the Fair Work Agency’s enforcement next year, and not simply rely on standard functionality or calculations offered, which do not take the new rules into account. We’d also encourage them to take this opportunity to respond to the government’s consultation and have their say on the Fair Work Agency’s enforcement approach.”