# Leave Encashment Calculation



## Omega (12 Oct 2006)

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."_


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## Numbs (12 Oct 2006)

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!


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## ajapale (12 Oct 2006)

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


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## Omega (13 Oct 2006)

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.


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## ajapale (13 Oct 2006)

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".



> _*This payment *__*includes any regular bonus or allowance that does not *__*vary in relation to work done*_


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


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## Omega (13 Oct 2006)

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.


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## ajapale (13 Oct 2006)

What  has to say about holiday pay. (for the record). The relevant legislation is [broken link removed]. [broken link removed] deals with cesser pay. Paragraph (5) deals with the rate.


> (5) In this section "appropriate daily rate" and "normal weekly rate" mean, respectively, the appropriate daily rate of the employee concerned's pay and the normal weekly rate of the employee concerned's pay determined in accordance with regulations made by the Minister for the purposes of this section.


 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.


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## Omega (16 Oct 2006)

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 may__be referred to a Rights Commissioner by an employee or any trade union of__which the employee is a member with the consent of the employee. The__relevant complaint form is available from this Unit or can be downloaded__from 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 be__extended by a further 12 months if the Rights Commissioner is satisfied__that the failure to present the complaint within the normal 6 month period__was due to reasonable cause.__ The Rights Commissioner, on receipt of a complaint, will send a copy of the n__otice 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_


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## ajapale (16 Oct 2006)

What does your contract of employment have to say about the "year end" payment?


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