CIPP Policy Update - June

5 June 2017

Adviser Introduction

One of the effects of the forthcoming general election is the dissolution of government. The pre-election period (purdah) is a time where only essential government business is meant to take place, so not only are most consultation meetings postponed but also expected publications are delayed. Ahead of the big vote, party manifestos are being dissected, disseminated and debated by businesses and media alike. Once a new Government has been elected we will start to be in a position to know which clauses and issues will be resumed in the Finance Bill and have an idea of the future consultation work the CIPP policy team will be involved in. However, Brexit negotiations will no doubt take precedence but certainly our routine consultation forums will recommence. In the meantime here are some topical items well worth highlighting.

Holiday Pay

How up to date is your knowledge on salaried hours contracts? Holiday pay calculations such as these continue to come under scrutiny and serve as an opportunity, if one were needed, to highlight the importance of remaining up to date with the latest guidance from BEIS (department for Business, Energy and Industrial Strategy). Employers often make use of salaried hours contracts to provide their employees with a steady and consistent income stream throughout the year where their working hours or weeks may vary either due to seasonal demands or term time working.

The latest guidance on calculating the Minimum Wage – which has taken on even greater importance since the increase in hourly rates brought in through the National Living Wage, was last updated in April 2017 – have you taken a look recently?

To be a salaried-hours contract, the contract between you and the worker should set out:

  • a basic number of hours for which the worker is to be paid (for example 2,000 hours)
  • that the worker is entitled to an annual salary

You do not have to show the total basic hours for a complete year but it is better to do so. However, it must be possible to precisely calculate what the total basic annual number of hours is in relation to the full year.

New holiday pay guidance in the pipeline

One of the reasons why employers get so confused about how they should be calculating holiday pay and leave, notwithstanding the particular circumstances of individual businesses, is that no-one is quite sure what the law says, and even less how it should be applied. And this is understandable because there have been innumerable court cases challenging the calculation of holiday pay. Although in most instances the judgement only applies to that specific case, there can often be more widespread implications. With so many cases still ongoing it's no surprise to hear that some employers are unclear what they should be doing so have taken a "do nothing" approach, especially when existing government guidance is vague.

For some time now the CIPP policy team has been engaging with BEIS (department for Business, Energy and Industrial Strategy) and we have to date held three Policy Think Tanks to discuss the problems faced by employers when calculating holiday pay and leave; the end objective being to produce clearer guidance.

What exactly is guaranteed, non-guaranteed and voluntary overtime and equally importantly, what is not? What is a bonus and what is commission? What does regular mean? Can there be scenarios and worked examples covering both entitlement and actual calculations? Can there be a broader range of definitions and examples to give employers more scope to be able to apply the principles to their particular circumstances? These were just some of the key points to come out of the Think Tank discussions.

It was heartening to hear the BEIS representative state that, although we are unlikely to see regulatory change in the near future as a result of Brexit, this does not mean that the guidance cannot be improved now. Both the BEIS and ACAS representatives agreed that it should be possible to extend the level of detail in the guidance. Delegates were specially pleased when the offer was made to include volunteer attendees in the review of draft guidance before publication, when possible. So ACAS has now begun the difficult task of drafting the new guidance. We will of course keep the industry informed of its progress through our news pages.

The CIPP run a practical half day course which includes an overview of the legal framework that governs holiday pay and entitlement, as well as worked exercises to explore the calculations thoroughly. This course will always include the most up to date information to account for ongoing case law. Visit the training area of our website for full details.

Our latest quick poll asks how confident you are about your calculations, processes and record keeping to ensure your compliance in paying the minimum wage. Please do take a moment to participate. Our poll is situated to the right of all of our news items on the CIPP website.
  • Author Profile
    • Sp avatar Diana Bruce

      Diana is CIPP Senior Policy Liaison Officer and Guest Author for Smart Pension.