# Leave Encashment Calculation

Discussion in 'Work, Careers, Employment rights, further study' started by Omega, Oct 12, 2006.

1. ### OmegaFrequent Poster

Posts:
316
I have a question in relation to the calculation of the value of untaken annual leave which is used when an employee ceases employment.

In our case, 10% of our salary is "deferred" until December, when it is paid as a lump sum. Historically, this was a discretionary "Xmas" bonus which was later formally integrated into salary. This occurred many years ago. Prior to the integration, the company's formula for calculating the value of untaken leave was: Basic Salary / 52 / 5, giving an average daily rate. The 10% Bonus, as it was then, was not used as part of this calculation. However, the company has persisted with this formula right up to the present and it does not appear to have been challenged.

My position is that I may be ceasing employment in the near future and as I have a considerable amount of untaken leave, built up over many years, I need to know if the formula currently used is correct - or should it be based on the "Gross" Salary amount?

I have read the booklet found on the ENTEMP website at link: http://www.entemp.ie/publications/employment/1997/holidays.pdf
and I have highlighted a section below which I think may be applicable.

Perhaps someome could clarify this matter for me,

Many Thanks,

Peter.

"How to calculate an employee's holiday pay
2.3 The method of calculating the weekly rate of holiday pay is as follows:
(i) If the employee's pay is calculated wholly by reference to a time rate or a fixed rate or salary, the amount paid to the employee for one week of paid annual leave is equal to the amount paid to him/her in respect of the normal weekly working hours last worked by the employee before the annual leave commences. This payment includes any regular bonus or allowance that does not vary in relation to work done, but excludes any pay for overtime."

2. ### NumbsFrequent Poster

Posts:
58
Hi Peter,

It would seem reasonable to me that the bonus should be incorporated into this calculation especially since the company you refer to formally integrated it into the gross salary. I worked with a company that had a similar practice!

3. ### ajapaleModerator

Posts:
7,684
Hi pgf,

The question here is "At what hourly rate is annual leave paid?".

The cessor pay calculation should be at the same rate as if you had taken the leave on the days before you left. From what I can see that was "basic +10%".

Your interperetation appears to be correct.

On occasion companies have ageed with the trade unions that annual leave be paid at an agreed rate. This occurs where you have an atypical workforce on piece rate or highly variable seasonal work.

btw have you documentaty evidence of the large number of days leave you have built up over the years? In a cessor pay situation employers have been known to dispute the number of days or point to a "use it or loose it" policy.

aj

4. ### OmegaFrequent Poster

Posts:
316
Hi ajapale,

Thanks for the helpful response.

The question here is "At what hourly rate is annual leave paid?".
- We don't get paid by the hour, so that may not apply.

The cessor pay calculation should be at the same rate as if you had taken the leave on the days before you left.
- Is there some legislation covering this concept of "cessor pay"?

.....documentary evidence of the large number of days leaave.....
- not an issue, no dispute over number of days....
The company has just recently introduced a "use it or lose it" policy, which is not applicable to historical untaken leave.

Peter.

5. ### ajapaleModerator

Posts:
7,684
Sorry pgf I misunderstood your question. I thought that you were an hourly paid employee and not on an annual salary.

What does your contract of employment say about the 10% deferred payment?

I assume that when one leaves during the year that you get a pro rated 10% deferred payment?

It would appear to me that your annual salary is "basic salary + 10%." Cessor pay should be paid at a daily rate of "annual salary*1.10/52/5".

Since the 10% deferred payment is a regular payment that does not vary in relation to the work done.

The concept of cessor (cessar, cesser) pay does exist in legislation.

Finally are you a member of a trade union?

aj

6. ### OmegaFrequent Poster

Posts:
316
Thanks again, ajapale.

I assume that when one leaves during the year that you get a pro rated 10% deferred payment?
- YES

...are you a member of a trade union?
- NO; but if I was aware of the legislative basis for the "cessor pay",
I could (and would) argue with them and I don't see how they could then object.....

Peter.

7. ### ajapaleModerator

Posts:
7,684
What Oasis has to say about holiday pay. (for the record). The relevant legislation is Organisation of Working Time Act 1997. Section 23 deals with cesser pay. Paragraph (5) deals with the rate.
My interpretation is that that you should get paid "basic annual salary *1.10/52/5" (this would be the practice in companies am aware of) but you should contact entemp directly to determine the position with fixed annual payment at year end. I am aware of some companies who pay a "13th month" at christmas so Im sure the entemp have come across the question of cessor pay for these employees.

Phone: 01 6313131
LoCall: 1890 201 615
Fax: 01 6313217
Email: erinfo@entemp.ie
Full contact list
Davitt House, 65a Adelaide Road, Dublin 2.

8. ### OmegaFrequent Poster

Posts:
316
Here we go again.....

I e-mailed ENTEMP on Thu 12 Oct, got no reply so I rang them this morning. They said they didn't get the e-mail. I sent another today.
Then I get this reply, shortly afterwards, which is obviously a direct quotation from some publication. They seemingly don't intend to think about the matter too deeply - at least not at this juncture.

Is there anyone else who could help? I just wanted an opinion on the legality of the issue. Thanks.

Complaints about any breaches of the Organisation of Working Time Act maybe referred to a Rights Commissioner by an employee or any trade union ofwhich the employee is a member with the consent of the employee. Therelevant complaint form is available from this Unit or can be downloadedfrom the Department's website at www.entemp.ie
Written notice of complaint must be made within 6 months of the date of the alleged contravention. The time limit for submitting a complaint may beextended by a further 12 months if the Rights Commissioner is satisfiedthat the failure to present the complaint within the normal 6 month periodwas due to reasonable cause. The Rights Commissioner, on receipt of a complaint, will send a copy of the notice of complaint to the employer. The Rights Commissioner will then give the parties an opportunity to be heard and to present any evidence relevant to the complaint. After hearing the parties the Rights Commissioner will issue a written recommendation. The employer or employee may appeal the Rights Commissioner's recommendation to the Labour Court within 6 weeks from the date it was communicated to the parties. The Labour Court shall copy the notice of appeal to the other party and hear the parties according to its own procedures. If you have any further queries please do not hesitate to contact this Unit at the numbers below.
Regards
Employment Rights Information Unit
Tel: 01 631 3131
Lo-Call: 1890 201 615

9. ### ajapaleModerator

Posts:
7,684
What does your contract of employment have to say about the "year end" payment?