Business Software and Systems

Is your payroll system calculating holiday pay correctly?

22 March 2019
2 min read

Recently there has been a lot of press around incorrect calculations of holiday pay by some government agencies and that some private sector workers could be affected too.

Are you confident that your payroll is compliant with the Holidays Act?

We have received a lot of enquiries from businesses on the back of this and have been working with them to provide certainty over their payroll calculations.

The legislation is complicated, and is open to interpretation which makes it difficult at times to apply consistency across all employees, and how they are paid.

If you have any doubts that your employees have not been paid correctly, then we would recommend that at the very least you review your payroll system, including historical data for leave payments, with an emphasis on the calculations used to calculate public holidays, sick leave, alternative leave and bereavement leave.

  • Are you paying discretionary or non-discretionary bonuses?

  • Do the allowances being paid need to be included for holiday pay calculations?

  • And are you recording the days paid for those employees who work variable hours or regular overtime?

The incorrect treatment of those three questions alone will mean that your employees are more than likely being underpaid, and the risk to you as an employer increases.

With labour inspections now prominent in the workplace, and these issues being circulated throughout the media, there is greater potential for personal grievances and a higher risk to employers of an inspection and possible financial remedy to be provided to underpaid employees.

Payroll is a specialised function which relies on continual education and a thorough knowledge of a broad array of applicable legislation, which is itself subject to constant change.

The Findex payroll team has reviewed numerous payrolls recently and can provide guidance on how your employees should be paid, as a number of employers believe the software will get it right, which isn’t always the case.

The payroll team have found that it is the lack of understanding by payroll administrators that causes the most issues, but issues that can be avoided by making sure the software is correctly set up, and having a thorough knowledge of the calculation methods for holiday pay.

Should you have any reservations about the correctness of your payroll, please get in touch with our payroll team, who can discuss your individual circumstances making sure your compliance is in line with legislative standards.