Overtime & holiday pay

Workers have won an important case at the Employment Appeal Tribunal that overtime should count when calculating their holiday pay entitlement.

What is this about?

Up until now, the EU Working Time Directive which says workers should receive their 'normal' pay when they take time off has been interpreted as saying that holiday pay should be at an employee's basic rate of pay, which means any additional payments for regular overtime aren't included.

What’s changed?

In future, holiday pay must be calculated on a worker's 'normal' hours. This includes overtime if it is part of their usual working pattern. This will affect those working in industries were extra hours worked above their contracted ones are paid, such as retail and manufacturing. Many people who work in offices may find themselves working over their contracted hours but do not get paid extra for it. They will not get the additional holiday pay, as they are not paid any extra for doing the overtime in the first place.

Backdated claims?

The tribunal also ruled that workers can make backdated claims, but only for a limited period. Employees will not be able to claim more than three months after the last incorrect payment. Under some circumstances, employees may be able to claim holiday pay further back using a breach of contract claim.

Imminent impact?

A final decision on the ins and outs of this ruling could be a number of years away if this decision is referred to the Court of Appeal. Claire Horsfield of CH Consultancy gave us this advice “This ruling has followed closely after a similar judgement relating to holiday pay and commission payments.  Our advice to employers is to understand which employees could be affected by undertaking a immediate review of your payroll.  Until clear guidance is issued from the government or courts, we do not advise businesses to make any backdated payments.  If businesses want to limit their costs and/or admin by reviewing their overtime, bonus and commission arrangements CH Consultancy can assist with this.“ Ruling http://www.judiciary.gov.uk/judgments/bear-scotland-v-fulton/