Manage overtime

If your workers get overtime, commission, or bonuses you must include these payments in at least four weeks of their paid holiday.

The Working Time (Amendment) Regulations (Northern Ireland) 2023, which came into effect in January 2024, have brought significant changes regarding how overtime affects paid annual leave entitlement.

Under these amendments, all types of overtime - both compulsory and voluntary - must be included in the calculation of paid annual leave entitlement.

Key points of these amendments include:

• The inclusion of regular overtime when calculating an employee’s paid holiday entitlement. Therefore, if an employee regularly works overtime, their holiday pay should reflect their normal earnings, including the overtime pay.
• Holiday pay should be based on the employee’s "normal remuneration," which includes regular overtime, rather than just their basic salary. The reference period for calculating holiday pay is typically the 12 weeks leading up to the leave, although there may be variations depending on specific employment contracts or agreements.
• Employers need to adjust their payroll systems to ensure that holiday pay calculations include all regular overtime. Therefore, in order to comply with these regulations accurate records of overtime worked need to be maintained.

These changes apply to the four weeks of annual leave that are derived from the EU Working Time Directive. They do not necessarily apply to the additional 1.6 weeks of leave (statutory annual leave) provided by Northern Ireland law, although many employers apply a uniform approach to avoid administrative complexities.

In summary, under the new regulations, overtime, commission, and bonus payments must be factored into employees in Northern Ireland’s holiday pay calculations, ensuring that holiday pay reflects their normal earnings, including regular overtime payments. For further advice, you can contact the Labour Relations Agency (LRA) Workplace Information Service on Tel 03300 555 300.