New holiday pay law hits small employers

Small hospitality employers are struggling to cope with statutory changes to holiday entitlements that were introduced on 1 October, lawyers have warned.

Under changes to the Work and Families Act, statutory annual leave entitlement is increasing in two stages. It rose from 20 to 24 days on 1 October this year and will rise again from 24 to 28 days on 1 October 2008.

The changes were intended to stop unscrupulous employers including the eight Bank Holidays in their employees' statutory leave.

However, according to law firm TLT Solicitors, many hospitality businesses that rely on casual staff are failing to adhere to the law when paying workers their newly granted holiday entitlement, citing a long-standing practice of paying extra instead of offering leave.

Stuart McBride, head of employment at TLT, said: "One approach that employers and employees quite like is giving employees a little uplift to their hourly rate but they never actually take a paid holiday. Then you are paid for your holiday as you go along.

"However, there have been a lot of legal cases surrounding that practice] and that is not a lawful approach. This is where the right to paid holiday differs from working-time regulations. Workers may feel they have a contractual obligation to an increased hourly rate."

McBride urged employers to review their contracts and procedures and, where they could, invest in improvements to payroll systems.

By Christopher Walton

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