Under the Working Time Regulations 1998, most workers are entitled to paid holidays or annual leave, writes Peter Done, managing director of Peninsula. A worker has the right to holidays from his or her first day of employment and the entitlement is four weeks a year. Additional holidays may be provided at your discretion. Make sure the terms appear in workers’ contracts.
Holiday pay is based on a normal week’s pay. Part-time, casual and agency workers are entitled to the same holidays as full-time workers, calculated pro rata. For each week of leave, workers are entitled to a week’s pay. Workers on variable hours should get their average hourly rate multiplied by the normal working hours in a week. For shift workers you multiply the hourly rate by average weekly hours in the preceding 12 weeks.
A policy on unpaid leave is advisable. Workers above school-leaving age are entitled to four weeks’ paid holiday a year. Workers below school leaving age must have a two-week break during their school holidays.
When calculating holidays, tell workers when your holiday year starts and stipulate this in their contracts. If employees do not take their entire entitlement in the current holiday year, you are under no obligation to carry anything over to the next year. However, a worker who is on long-term unpaid absence because of ill-health may be entitled to paid annual leave if he asks for it.
When your workers leave, even if dismissed without notice for gross misconduct, they must receive pay for any holiday they are entitled to but have not taken. You can make a deduction from an employee’s final payment for any leave taken in excess of their entitlement.
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NEED WE BE A COMPANY?
TR writes: I do voluntary work for a local charity, which is also a registered company limited by guarantee. I cannot see what advantage there is in it being a company. The drawback is that we are paying £350 for accounting fees and almost £500 in insurance, most of which is for personal liability. We have no paid staff and are run totally by volunteers. Our income is less than £2,000 and comes mainly from donations. Our assets consist of personal computers and software. If we ceased to be a company we could cut our costs by 50%. Would this be a good move?
The main advantage of a charity being a limited company is that this gives greater financial protection to the trustees, writes Nick Brooks, a partner at Kingston Smith. From your correspondence it is difficult to assess if your charity’s activities are of a nature where there are potential risks for the trustees and whether you need the protection of limited liability.
However, the costs you mention have little to do with the charity being a company. Accounts would still need to be produced for the charity if it were not a limited company. There would always be some accounting costs.
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You say that most of the insurance cost is for personal-liability insurance, by which I assume you mean indemnity for the directors/trustees. This would be even more important without the protection of limited liability.
If you have no risks or are prepared to accept the limited risks you face, then you may well be able to save the cost of the insurance. But this is an issue for each trustee individually and is not something you can decide on their behalf.
Kingston Smith, the chartered accountant, and Peninsula, the employment-law firm, will advise owner-managers on their problems. If you have any questions, write to Business Doctor, The Sunday Times, 1 Pennington Street, London E98 1ST or fax 020 7782 5765. Advice is given without legal responsibility