Holiday pay ruling may affect millions of workers

4th November 2014 by

Bear Scotland Ltd & Others v Fulton & Others
Hertel (UK) Ltd v Woods
Amec Group Ltd v Law & Others

All employees have a right to paid holiday. The question is how much pay should they get e.g. basic salary only, salary plus commission, or salary  plus overtime.

The European Court has already ruled that regular commissions should be included in holiday pay.

This morning the UK Employment Appeal Tribunal has decided that payment for non guaranteed overtime should also be included in holiday pay. This ruling is estimated to affect around 5 million workers in the UK.

The key points of the judgement are that:

  • workers are entitled to be paid a sum of money to reflect normal non-guaranteed overtime as part of their annual leave payments
  • the additional payment only applies to 4 weeks leave in any year (under the Working Time Directive) i.e. not to the full leave entitlement of 5.6 weeks or more
  • claims for arrears of holiday pay will be out of time if more than three months has elapsed between successive underpayments

A number of questions remain outstanding including how irregular overtime working may be treated for holiday pay purposes.

Whilst the case is being appealed, employers of workers who are paid for overtime should account for and will be faced with increased costs for holiday pay in the future, as well as making provision for claims for back pay.

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