Childcare counsel - holiday pay calculations, gender pay gap reporting

Our nursery currently makes holiday payments based on basic salary only. But a member of staff recently said that any overtime or bonus paid to staff should also be included…

What should be included in holiday pay is an issue that keeps rumbling on, with clarification awaited from ongoing cases in the courts. With EU law (the Working Time Directive) currently in force, it will be for the UK parliament to decide what employees are entitled to post-Brexit.

Currently, for the first 20 days of each holiday year, holiday pay should include basic salary and other elements of ‘normal remuneration’.

Where there is no fixed pattern of work, employers have previously calculated holiday pay based on the past 12 weeks’ pay. This remains good practice, assuming this is a representative normal period. Where there is a fixed pattern of work, employers are required to decide what elements of remuneration fall within the definition of ‘normal remuneration’.

It appears that all types of overtime, including voluntary if worked frequently and regularly, need to be included in holiday pay. Performance-related bonuses are also likely to have to be included. Annual bonuses are less clear-cut. If they are based on nursery, rather than individual, performance, it may be possible to exclude them.

Many employers continue to adopt a ‘wait and see’ approach while the law continues to develop. If there is pressure to address the issue, the nursery could consider an agreement with the staff on the method of calculation, to include an option to review should the law develop significantly.

I’ve heard there will be an obligation to report on our setting’s ‘gender pay gap’ from next year. As the workforce at the nursery is predominantly female, I do not believe there will be any obligation for our particular nursery. Is this correct?

All employers with 250 employees or more will be required to publish information relating to pay, regardless of the make-up or duration of employment of the workforce.

The number of employees is taken on the ‘snapshot date’, which is 5 April in each year. The first gender pay report will be required from eligible businesses by 4 April 2018. The required data includes the difference between median and mean average rates of pay and bonus payments. Such data must be published on a government-sponsored website and on the nursery website for at least three years. However, there are currently no specific penalties for non-compliance.

All questions to hannah.crown@markallengroup.com