As a business owner, you are required by law to provide workers with a specified amount of leave over the course of a year and to pay them accordingly. All of your employees are also entitled to holiday pays which are based on their current wage rates. Computing for an employee’s entitlement to annual leaves and holidays is not that complicated if one has a fixed salary rate and is working for the same number of hours for each day. Calculating their salary gets a little more complicated if an employee does overtime work, completes a variable number of hours each day, and receives bonuses and commissions on top of their regular wages.
If you are still confused about how to calculate an employee’s holiday pay, then the concise guide below should help you out. Check out these three tips for calculating your employee’s entitlement around the holidays and get the job the done faster and easier.
- Calculate holiday entitlements based on the daily number of hours worked.
As stated before, employees who are paid at a fixed rate and are working for the same number of hours for each week shall receive the same wage amount for the holidays. So for example, you are working for forty hours a week at a rate of $10 per hour, you will be getting $400 for a week of holiday.
Calculating holiday pay for zero hours contracts will be a slightly different. Zero-hour contracts are those contracts where an employer is not required to provide a minimum amount of working hours and the employee can either accept or reject the offer. The average number of hours worked and the average hourly pay for the past 12 weeks will be used for the computation. A week’s worth of holiday is equal to the average number of hours worked per week multiplied by the average hourly rate. If an employee skips a week of work, then the reference period will be adjusted back to a week where an employee has completed a certain number of working hours.
- Know how overtime hours are incorporated into holiday pay computations.
There are three types of overtime: ‘guaranteed’ wherein the employer is required to offer and the employee is required to accept, ‘non-guaranteed’ wherein the employer is not required to offer but the employee is required to accept if extra hours are offered, and ‘voluntary’ overtime wherein both parties have no obligation. The first and second types constitute a portion of an employee’s regular working pattern and must be included in the holiday pay. Regarding ‘voluntary’ type, the guidelines set by the law is unclear; and as long as no new instructions have been released on this type, employers are not required to include overtime pay to the holiday pay.
- Learn how commissions and bonuses are applied to holiday pays.
Commissions and bonuses are required by the Tribunal to be included into the holiday pay. These are basically based on the performance, productivity, and amount of sales that an employee achieves over a certain period of time. The reference period depends on the employer’s decision but it should be based mainly on how often bonuses are paid to the employees.