PY-GB: New Holiday Pay in SAP HR Payroll

Do you know what the new ruling on Holidays Pay could mean for your company? Part of the new ruling needs further clarification and details, but there are decisions that you should make now to ease the transition and keep changes in SAP HR Payroll manageable.

So, let’s start with some of the key points to consider before you implement the holiday pay solution in SAP Payroll

• Which overtime and other ‘regular payments’ do you want to be included in holiday pay?

It is up to your company to interpret the government guidance as to what payments go into the holiday calculations – such On Call payments, Commissions or First Aid Allowances. To make this relevant, you need to go down to the level of SAP wagetypes here.

• Average for this pay to be calculated over a 12 week period before the holiday

Some organisations take this quite literally, others are more pragmatic to allow for easier automation in SAP. There are two main options here. You can chose to calculate with 3 full calendar months before the absence, or be exact with the 84 days before the day the absence starts. The second option would be far more complex to implement in SAP or most other payroll systems, because values in payroll results are usually full months. And yet, you could add more complexity,if you wanted to: some organisations decided to exclude periods the employee has unpaid leave from the calculation and use older periods instead. Some customers with a highly cyclical business, where overtime doesn’t distribute evenly across the year chose to use a full calendar years only.

• The additional holiday pay is to be paid for the first 20 days of holiday for your employee

The ruling states that the uplift must be paid against the first 20 days of the holiday of the year, and many companies may choose to be more generous and apply the uplifted rate to all holidays.  If you do want to pay for the 20 days only, then you need to find a way of only applying the uplift to those days. You might want to work with extra time quota here.

These are just three key questions to get you started with:

1. How you manage your employees‘ leave in SAP HR now may raise further questions, such as whether you allow employees to carry over any unused leave from year to year?
2. Where does this fit in, does the carry over attract any of the uplift?
3. Do you have the overtime hours going into a bank account until month end? How should these hours be handled?

There is no SAP standard solution available out of the box, but options with standard configuration tools will get you a fair way.  But depending on the way that your employer wants to pay this uplift, then you may need to think through a bespoke custom function to do the calculations in SAP Payroll UK.  Whatever you path you choose to follow, you also need to ensure that the solution makes the calculations easy to explain to your employees and that it shows clearly on the payslip.

Finally, what we have discussed so far is to map out how you will pay the uplift going forward; but there is still the question of how you are going to manage any backdated claims. The Deduction from Wages (Limitation) Regulations 2014 provides a two-year backstop period. These two years may then be further limited by whether there have been three month gaps between holidays where no underpayments were then made.  Are you sure that you have the correct historical data to manage these claims, never mind how far back they might go?

In the next blog we will look more closely at the technical side of the solutions available for holiday pay in SAP HR Payroll, the functions in calculating your averages, how to apply the uplift to the chosen days and any other considerations.

If you want to discuss your organisations requirements for the new holiday pay, just get in touch and we can arrange a conference call or a meeting.