Employers risk fines for holiday pay errors as Fair Work Agency launches
As the Fair Work Agency launches on April 7, bringing new enforcement penalties for holiday pay errors, RSM UK has found many employers may be at risk of either under or overpaying their workers. This potentially risks large fines and reputational damage from being publicly named, similar to the current National Minimum Wage enforcement regime.
Research conducted by the leading audit, tax and consultancy firm found that more than half (56%) of employers surveyed are paying all types of holiday at the same rate, while 44% said different types of holiday are paid at different rates. As legislation provides for differences in how statutory UK holiday, statutory EU holiday, and contractual holiday is calculated, the findings suggest many employers may be inadvertently making errors in their payments. Under new enforcement rules employers could be penalised up to 200% of unpaid holiday pay for any underpayment errors.
While half (50%) of employers use software which calculates bespoke holiday pay tailored to their workforce, over a third (39%) admitted they relied on their software’s default settings, and one in ten (11%) said they calculate holiday pay manually, meaning large businesses are leaving themselves open to miscalculations.
Chris Robson, Employment Tax Partner and Fair Pay Lead at RSM UK said: “These findings suggest that many employers may be under or overpaying their staff when it comes to holiday pay, leaving themselves open to the risk of large fines as the Fair Work Agency begins to focus on this area. We’re advising employers to treat holiday pay as the new National Minimum Wage in terms of the need for stringent compliance measures. Employers should take steps now to ensure their holiday pay calculations are as robust as possible, and account for any holiday pay variations required.”
*Research was conducted by 3Gem on behalf of RSM UK. Data was collected between 9 and 18 March from 400 UK businesses ranging between £50m-over £500m turnover. 3Gem is a global insights business, powered by a proprietary panel of more than 10 million people representing voices across 55 countries.