VAM Holiday Payments
June 2014
So why do we have to have separate
holiday pay entries?
Rates of pay which include a holiday element are unlawful…
"Rolled up" holiday pay is the practice of not paying the worker for their annual leave at
the time that the leave is taken, but incorporating an element relating to holiday into
their hourly rate. This method of paying for holiday is convenient for employers,
especially where an individual’s hours of work and pay vary during the year (agency,
temporary). However the practice was criticised as often individual’s did not take their
actual holiday entitlement.
Historically the practice has had mixed feelings;
 the English Courts generally accepted "rolled up" holiday pay providing certain
safeguards were in place,
 the Scottish Court of Session ruled the practice unlawful,
 the European Advocate General felt the system could be acceptable provided there
were steps to ensure workers actually took their holidays.
In March 2006, following a reference to the ECJ (European Court of Justice) the ECJ held
definitively that the practice of paying "rolled up" holiday pay was unlawful.
How is the amount calculated? (lump sum amounts)
First confirm whether the payment includes or excludes an amount for
holiday pay.
If the amount to be paid does not include holiday pay then the holiday pay
amount is 12.07% of the amount to be paid.
Example
Cash sum
Holiday Pay
Total to be paid
£500.00 (does not include holiday)
£60.35 (£500.00 x 0.1207 = £60.35)
£560.35 (£500.00 + £60.35)
If the amount to be paid includes holiday pay then the amount to be paid
must be reduced by the holiday pay amount.
Example
Cash sum
£500.00 (includes holiday)
Revised Cash sum £446.15 (£500 ÷ 1.1207 = £446.149 rounded)
Holiday Pay
£53.85 (£500.00 – 446.15 = £53.85)
How is the amount calculated? (hourly paid)
First confirm whether the rate includes or excludes an amount for holiday pay.
If the rate to be paid does not include holiday pay then the holiday pay amount is
12.07% of the rate.
Example
Hourly rate
Holiday Pay
Total to be paid
£10.0000 per hour (does not include holiday)
£ 1.2070 per hour (£10.00 x 0.1207% = £1.207)
£11.2070 per hour (£10.00 + £1.1207)
If the rate includes holiday pay then the rate must be reduced by the holiday pay
amount.
Example
Hourly rate
£10.0000 per hour (includes holiday)
Revised hourly rate £ 8.9229 per hour (£10.00 ÷ 1.1207 = £8.92299)
Holiday Pay
£ 1.0771 per hour (£10.0000 – 8.8229)
Remember that the hourly rate can never drop below the National Minimum
Wage (NMW) which is currently £6.31 per hour (£6.50 per hour from October
2014).
Things to remember
•
Every payment should be made up of two separate entities – a payment or hours & holiday
pay.
•
Every payment made is subject to holiday pay (equivalent to 7.272 minutes for every hour).
•
There is no requirement to holiday being taken as hours. Instead holiday payments should be
submitted as lump sum cash amounts.
•
If you really want to then the lump sum holiday amount can be shown as 1 hour @.
•
VAM hourly rates which equate to a spinal point never include holiday therefore holiday pay
should be added on top.
•
Hourly rates, regardless of whether they equate to a spinal point or not, can never be
reduced below the National Minimum Wage (NMW) which is currently £6.31 (rising to £6.50
from October).
Example
a rate of £7.00 can never include holiday
£7.00 ÷ 1.1207 = £6.25
(£6.25 x 1.1207 = £7.00).
Where to get help
VAM Holiday Pay web page
www2.warwick.ac.uk/services/humanresources/payroll/payguidproc/vamholiday
The Payroll Team…
Payroll Manager
Tal Dhaliwal
Ext 22721 T.Dhaliwal@warwick.ac.uk
Deputy Payroll Manager
Stuart Threlkeld
Ext 22021 S.Threlkeld@warwick.ac.uk
Payroll Supervisor
June Williamson
Ext 51385 J.L.Williamson@warwick.ac.uk
Payroll Co-ordinators
Linda Soar
Lovey Chima
Dee Mistry
Charlotte Pearson
Ext 22718 L.D.Soar@warwick.ac.uk
Ext 50218 l.k.chima@warwick.ac.uk
Ext 28019 Dee.Mistry@warwick.ac.uk
Ext 22724 C.L.Pearson@warwick.ac.uk