Pay reference periods & elements of pay: holiday pay
The legislation that applies to this page is as follows:
* National Minimum Wage Regulations 2015, regulations 9, 10(h)(i) & 10(i)
Holiday pay should initially be included in the worker’s total remuneration.
If the worker takes the holiday then it is appropriate to consider whether the payment is in respect of an absence (NMWM09080). If so, the amount then needs to be reduced from the calculation of national minimum wage pay.
However if the worker does not actually take the holiday, the holiday pay will remain included in the total remuneration and there is no corresponding reduction when calculating national minimum wage pay.
For example: In June, a time worker is paid his monthly pay of £800, plus £200 for 2 week’s holiday pay. He is absent on holiday for the last two weeks of June. The worker’s total remuneration for that pay reference period is therefore £1000. However, the payment in respect of absence, in this case £200, is subsequently reduced from the calculation of national minimum wage pay. This will then result in the worker’s national minimum wage pay being £800 (£1000 minus £200).
However, if the worker is subsequently asked to work instead of taking his holiday no reduction will apply. As he does not actually have any time off the worker’s total remuneration for that pay reference period is £1000 and there is no reduction for any absences.