Press Release: Holiday pay campaign is welcome but concerns remain about enforcement

Published on 28 February 2019

The Low Incomes Tax Reform Group (LITRG) welcomes the launch of DBEIS’ campaign to raise awareness of holiday pay, and reduce the number of underpaid workers. But LITRG cautions that, to really make a difference, action is needed to close the enforcement ‘gap’ in respect of holiday pay and to deal with the problem of false self-employment.

DBEIS’ campaign ‘It comes with the job’ is designed to help deliver on the recommendations of the Matthew Taylor Good work Review and Industrial Strategy commitments, by increasing awareness and understanding of holiday pay entitlements among both workers and employers. It is accompanied by detailed new guidance on calculating holiday pay for workers without fixed hours or pay, which will help workers to understand their rights and employers to understand their legal obligations.

DBEIS says that around £1.8 billion of holiday pay is unclaimed every year, affecting around 1.8 million workers, with those most likely to be affected being those in atypical roles.

As LITRG points out in its response to the ‘Good work’ consultation, arming workers with the knowledge to understand and self check their positions is a good starting point to tackle poor practices around holiday pay. However, LITRG says that low paid workers also need their positions protected. This leads LITRG to support the idea, mooted by Matthew Taylor and the Director of Labour Market Enforcement, that a state body should enforce holiday pay. 

LITRG Chair Anne Fairpo said:

“There are serious problems with holiday pay affecting certain low income workers, especially those in very short-term agency work. People in very short-term agency work used to get extra pay on top of their hourly rate instead of being given paid holiday leave, but this ‘rolled up’ system is now deemed unlawful. If a worker is not on a ‘rolled up’ system and leaves an agency having taken fewer holidays than they are entitled to, they should be paid in lieu of the untaken holiday, but we know that this does not always happen.

“It is unrealistic to expect workers to try ‘talking to their employer’ about problems such as this, as is often suggested, given the likely imbalance of power and the fear of repercussions.

“We urge the Government to move forward with proposals to enable state enforcement of holiday pay as soon as possible – starting with consultation to try and identify the most appropriate organisation for doing so. As holiday pay is taxable as normal income, this in turn will help raise Exchequer receipts, so the incentives for getting an effective state enforcement mechanism in place are there.”

LITRG highlights that holiday pay breaches can also arise outside of a job setting, as they often go hand-in-hand with false self-employment (that is, treating a worker as self employed, when, as a matter of fact, they are actually an employee).

Anne Fairpo said:

“False self-employment not only deprives workers of the certainty of having their tax and National Insurance dealt with under the PAYE system, but also deprives them of employment rights, such as holiday pay. 

“Protecting workers who are losing out on holiday pay as a consequence of false self-employment will, ultimately, prove much more difficult to tackle. But it is surmountable – it will just require some holistic thinking from DBEIS, as well as cross-organisational working with HMRC.”

The Department for Business, Energy and Industrial Strategy (DBEIS) holiday pay campaign was launched on February 25 2019 and will run for around one month throughout Great Britain.

The new guidance can be found on GOV.UK.

LITRG’s consultation response to Enforcement of ‘Employment Rights recommendations’ can be found on our website.

(28-02-2019)

Contact: Meredith McCammond (please use our Contact Us form) or follow us on Twitter: @LITRGNews