Holiday Buy Back and minimum wage

[keat63]

How would a holiday buy back scheme work if someone was on minimum wage.

Lets assume employee is earning £8.00 per hour and purchased 10 days extra leave.
The cost of 10 days leave would cost him £640 p/a.
Potentially reducing his hourly rate to £7.68 which is below minimum wage.

 

[Employment Law Clinic]

Why not just allow him 10 days of unpaid leave? Why does he have to "buy" the leave?

(If you have a reason to prefer buy back, what's wrong with that? His hourly rate won't reduce, as he'll still be paid say £8ph (or whatever the NMW is), and then spends his wages on taking holidays.)



Karl Limpert

 

[DontAsk]

He has handed back 10 days pay to take 10 days leave, so is working 10 days less. His hourly rate has not reduced.

 

[keat63]

Employees can currently take 5 days unpaid.
However, because they take a pay hit in one go, I believe that it's discouraging some from taking the unpaid leave.
Spreading the cost over the year would be less damaging to his pay packet, possibly making it more appealing to take the days, which would potentially be a benefit (work/life balance) to the employee and a cost saving to the company.

 

[mattk]

My understanding is that the employee would not be eligible for salary sacrifice-style benefits such as purchasing additional annual leave if it reduces their earnings below minimum wage.