Holiday pay concession to end next year

All holiday payments will become subject to National lnsurance Contributions (NlCs) from the end of October 2012.

The industry has benefited from a holiday pay ‘concession’ that exempted payments from NICs since the 1960s. This was created originally to ensure that paid leave was available to all workers in a construction industry where there was rapid turnover of staff and regular movement between projects. 

However, changes to the working time regulations in 1998, which require all employers to provide paid holidays, and the evolution of the labour market have removed the need for such an exemption.

The cancellation of the NIC concession was announced in 2007 and the industry was given a five-year period to adjust to the change.

The HVCA welfare benefit and pension provision will not be affected by withdrawal of the concession and will continue unchanged through the various schemes managed by its subsidiary Welplan. In addition, the holiday pay schemes themselves will continue for those employers who wish to use them as a convenient way of accruing holiday entitlement under the H&V Operative National Agreement or under their own contracts of employment.

However, any such holiday pay paid after 30 October 2012 will be subject to NICs.

In a series of meetings over the last four years between representatives of the industry and the Government, Ministers have acknowledged the long-standing role that the industry schemes, which administer the holiday pay of the construction industry, have played in providing welfare benefits and their central role in collective bargaining arrangements.

However, in the current fiscal climate it is difficult for the Government to justify continuing a concession that rewards employers for meeting what are now their legal obligations.  The Government has, therefore, confirmed the decision to remove the NIC concession from next year.  

Any holiday pay paid to employees after 30 October 2012 will be subject to employers’ and employees’ NICs.

However, the Government says it 'remains open' to other proposals that could support the construction sector at this difficult time and a working party of industry representatives will be established to continue dialogue with government officials.

Welplan website