Santa's not the only one keeping track: An international guide to holiday pay
Working overtime or extra hours during the holidays is part and parcel of being employed in a busy retail or consumer products environment. While staff often welcome the additional income, the associated accrual of holiday pay may not be top of mind and could be overlooked by employers who do not have in place robust holiday pay practices and payroll systems.
United States: The gift that keeps on giving (to plaintiffs)
Retailers with large footprints in the United States are all too familiar with wage-and-hour risks. The well-developed class- and collective-action practice in America is the gift that keeps giving to plaintiffs’ attorneys, when promises of compensable time off later can lead to statutory violations, and an employer’s failure to properly incorporate year-end bonuses into regular rate calculations can lead to a whole lot of coal in their stockings. The good news is that, under federal law in the United States, neither paid holiday time off nor extra pay for time worked on holidays is mandatory.
United Kingdom: A new enforcer comes to town
In the United Kingdom, case law has been developing over a number of years which establishes that holiday pay is meant to include a worker's normal remuneration. This is not just basic pay but also may include overtime, commission, and certain bonuses. Employers in the United Kingdom have generally been slow to ensure compliance in this area. However, fast forward to 2027, and the United Kingdom's newly created Fair Work Agency's (FWA) enforcement powers—which cover statutory holiday pay that has been underpaid, unpaid, or incorrectly calculated—will come into force. Although the response to the U.K. government's consultation on enforcement methods remains to be seen, proposals are being considered.
These include, for example, introducing a six-year look-back claim period in relation to statutory holiday pay (mirroring the six-year period for which employers are required to keep U.K. holiday pay records) and possible civil penalties for employer noncompliance. Australian employers will find this familiar. Employees can generally bring underpayment claims, including for annual leave and annual leave loading, up to six years after the contravention. Australian courts can order back payments for that whole period. However, Singapore and Hong Kong take different approaches. In Singapore, statutory holiday pay claims must first go to mandatory mediation and be brought within one year of the dispute arising (or within six months of the employee’s last day of work). Unresolved claims then go to the Employment Claims Tribunals. Employers must keep employment and pay slip records for the latest two years and for one year after an employee leaves. In Hong Kong, the Labour Tribunal hears holiday pay claims, and these are generally subject to a six-year limitation period. However, employers need only keep wage and holiday records covering the preceding 12 months of employment and for six months after employment ends. This mismatch can leave employers struggling to evidence older holiday pay.
Who's on the nice list for enforcement?
Particularly relevant to retail employers in the festive peak is that the United Kingdom is also consulting on how the FWA can concentrate its enforcement on lower-paid (or vulnerable) workers, such as by prioritizing lower-paid workers' complaints; this is also a current focus for the Australian Fair Work Ombudsman. In Hong Kong, the Labour Department enforces holiday entitlements through inspections and prosecutions. An employer who pays an employee in lieu of a statutory holiday or fails to keep wage and employment records faces hefty fines, whereas in Singapore, administrative penalties for civil contraventions and criminal offences can be imposed.
Rolled-up holiday pay: A frosty reception in Asia
For those U.K. employers that operate rolled-up holiday pay, the use and implementation of current practices for workers with irregular hours or part-year working patterns under the Working Time Regulations 1998 are also being considered. In contrast, rolled-up holiday pay gets a frosty reception in Asia. Hong Kong prohibits any form of payment in lieu of statutory holiday, and the new “468” continuous contract rule (four weeks' employment with at least 17 hours a week, or 68 hours over four weeks) with specific statutory holiday pay requirements has brought more part-time and irregular-hours staff within holiday pay entitlements. Unlike Singapore, overtime also counts where it is regular or averages at least 20% of monthly wages, so a busy festive season can feed into holiday pay for the year ahead.
The European Union: Same starting point, different recipes
Across the EU, the starting point is common: Holiday pay must reflect a worker’s normal remuneration, and overtime that is predictable, habitual, and a significant part of pay should be included. In Spain, overtime can generally be left out of holiday pay, but if it is paid in most of the 11 months before the holiday, it must be included, and it is for the employer to prove it was not habitual. In France, employers must pay the higher of the salary the employee would have earned had they continued working and one-tenth of the total gross pay received in the reference period (normally June 1 to May 31). Overtime pay received during the reference period is included in the one-tenth calculation, and the salary-maintenance method takes account of overtime the employee regularly works (but not one-off overtime), so a busy season can increase holiday pay. In Germany, holiday pay is generally based on the employee’s average earnings over the 13 weeks before the holiday. Variable pay (such as regular shift or other allowances) counts, but the statute expressly excludes overtime pay. However, in line with the EU principle above, the German Federal Labour Court has held that overtime worked regularly enough to change the employee's actual working time must be included, whereas occasional overtime can still be left out. This means that a one-off festive rush will not usually increase holiday pay, but a pattern of regular extra hours may.
Staying on Santa's good side
Whatever tidings the U.K. government brings, employers should review their holiday pay practices and ensure that they stay on Santa's good side because, importantly, the FWA will have the power to take action on behalf of a worker rather than an individual having to make a claim to an employment tribunal.
