Employees missing out

01 November 2019

This article was featured in the November 2019 issue of the magazine. 

Danny Done, managing director at Portfolio Payroll, discusses recent research findings on workplace entitlements and provides advice

The latest figures released by research group the Resolution Foundation have revealed the surprising extent to which employers are failing to provide staff with their workplace entitlements. These findings, which are the result of a three-year study into UK working practices, suggest there is significant room for improvement in key areas such as annual leave, national minimum wage (NMW) payments and the issuing of itemised pay statements.

Amongst a number of telling statistics, the study reveals that one in twenty respondents fail to receive their entitlement to paid annual leave, causing individuals to miss out on over £1.5bn a year in total. In light of this, it is important to remind employers that all employees and workers are entitled to the statutory minimum of 5.6 weeks’ annual leave per year, which equates to 28 days for those who work the traditional five-day week. The same provisions also apply to part-time workers; however, their entitlements should be pro-rated in relation to their normal weekly working hours. 

Things can become more difficult when it comes to holiday entitlements for those who work irregular hours, such as zero-hours’ staff. In situations where staff are offered the statutory minimum leave entitlement, these individuals should accrue annual leave at a rate of 12.07% of the total time worked. It is important that employers offering enhanced leave understand that this calculation will be different for them. 

Therefore, when a zero hours’ worker comes to request time off, employers should review their total working time over the leave year and inform them that they are able to take 12.07% as annual leave. Good record-keeping will be essential here in tracking how much time the individual has worked and any leave they have already taken earlier in the year. Having said this, recent case law has questioned whether this method is appropriate, given the different forms of irregular work, which means there may be further developments in the near future. 


...wise for all employers to review their existing business practices ...


A misunderstanding of employment status may also contribute to the failure to provide annual leave, with notable employers recently facing criticism for incorrectly categorising staff as self-employed as opposed to employees or workers. Self-employed individuals are not entitled to rights such as annual leave, NMW or statutory sick pay. Therefore, employers need to have a firm grasp of employment status to ensure they are not erroneously withholding rights from staff.

Employers often rely on contractual agreements to justify an individual’s employment status; however, tribunals will be inclined to look ‘behind the contract’ into the true nature of the working relationship. Therefore, employers should examine the conditions they place on their staff to accurately assess whether they are truly self-employed, otherwise they will be entitled to a host of additional workplace entitlements. 

The study also revealed that employers continue to fall foul of the law around NMW, especially when it comes to younger workers, as those aged 25 and under proved twice as likely to miss out on their NMW entitlements compared to any other age group. These figures are likely to be influenced by the multiple age-brackets associated with the NMW, as minimum hourly rates change frequently for those aged between 18 and 25. It can be difficult for employers to keep track of correct entitlements as an individual moves up between the age brackets; it is therefore important for human resources and payroll teams to work in unison to prevent any pay discrepancies from occurring.

Smaller employers can find themselves particularly at fault when it comes_to providing staff with their statutory entitlements, as those with limited resources can often struggle to keep up with legislative developments. This is perhaps why the Resolution Foundation found that workers in smaller companies faced a greater chance of not being provided with their itemised pay statement. New laws introduced in April 2019 extended the right to receive a payslip to include all workers, including casual and agency workers, and all employers have a duty to comply with this new requirement. Failing to provide staff with payslips will allow them to claim the total cost of any unnotified deductions, whether lawful or not, over the thirteen weeks prior to the claim being made. 

Ultimately, given the worrying findings of the Resolution Foundation, it would be wise for all employers to review their existing business practices on a regular basis to ensure staff continue to receive the correct entitlements. After all, failing to carry out this due diligence could create a number of issues down the line and potentially result in costly tribunal proceedings.