Peter Churchman: Holiday pay calculations more complex this year

You know how many shopping days there are to go, your children know how many sleeps there are until Santa comes and you are absolutely positive that Christmas is on December 25.

What if you found out that the Holidays Act 2003 meant that this wasn't always the case?

Christmas is difficult enough without having to work out what day it falls on.

The Holidays Act took effect on April 1 this year with the intention of clarifying entitlements to annual holidays, public holidays and sick and bereavement leave for employees and employers.

However, as we lead up to Christmas we find more and more employers are unsure about paying their employee entitlements to holidays over the festive season.

One complicating factor is that the public holidays this year fall on the weekend. December 25 and January 1 are both Saturdays and Boxing Day and January 2 are both Sundays.

The Holidays Act specifies that where those four public holidays (which are given special treatment under the act) fall on a Saturday or a Sunday, and that day would not otherwise be a working day for an employee, they transfer to the following Monday and Tuesday respectively.

However, if Saturday and Sunday would otherwise be working days for an employee, the public holidays are observed on the day on which they fall. The rationale behind this is a recognition of the changing workforce and the fact that not all employees work 9 to 5, Monday to Friday anymore.

The Holidays Act specifies that if you are required to work on a public holiday that would otherwise have been a working day for you, you are entitled to be paid time and a half for the hours that you work and to receive an alternative holiday (a day in lieu).

If you are required to work on a public holiday that would not otherwise have been a working day for you, you are entitled to be paid time and a half for any hours you are required to work but there is no entitlement to an alternative holiday.

This is because you would not otherwise have worked that day and therefore have not lost a day. This applies to all employees, including employees who are called in as cover.

This raises the question what happens when staff are brought in to work on the Monday and Tuesday following Christmas Day, Boxing Day, January 1 and January 2. Are they public holidays by virtue of having transferred from Saturday and Sunday? The answer is no.

The transfer provisions contained in section 45 of the Holidays Act only apply where the employee is working on days that would otherwise be working days for him or her.

If the staff are casual, or cover staff who do not have days which would otherwise be working days, the transfer provisions do not apply.

Employment agreements should also specify that employees are only entitled to receive time and a half for work on a public holiday where the requirement to work has previously been signed off by human resources or a manager.

Otherwise, employers risk a situation where staff attend work on a public holiday to accrue an entitlement to an alternative holiday.

Employers would be well advised to ensure that they are familiar with the provisions of the new act before the holidays to avoid over or underpaying employees over the holiday period.

* Peter Churchman is a partner at Kensington Swan working in employment law.