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An update on holiday pay

The impact on employers of the recent Employment Appeal Tribunal rulings and of the subsequent media coverage, is likely to be significant.

The rulings clarified a number of points regarding holiday pay, summarised by Flint Bishop LLP as follows:

  • A worker should not be put at a financial disadvantage when taking holiday, or deterred from taking holiday due to risk of financial disadvantage.
  • Workers should receive what would be their “normal pay” whilst they are on holiday.
  • “Normal pay” includes anything that is “intrinsically linked” to the performance of their role and therefore includes – compulsory over-time (including even where that overtime is not guaranteed), commission linked to the worker’s normal role and certain shift bonuses/attendance bonuses etc.
  • The key as to whether such pay should be included in the holiday pay calculation is whether it occurs with enough frequency to be said to be “normally included” as a part of that workers pay.
  • This will not apply to members of staff who only receive salary, or those who also have the option of voluntary overtime.  Contrary to some media reports this case does NOT apply to voluntary overtime.
  • Workers can bring claims for underpaid holiday pay going back in time, at most to the date when the Working Time Regulations 1998 came into force. 
  • The above only applies to the 4 weeks holiday entitlement granted from Europe (the 20 days full time equivalent).  The additional 1.6 weeks given to workers in England and Wales (i.e. the 8 normal bank holidays) don’t strictly speaking need to be paid in this way.

 Ursula Evans, Bates Weston’s HR Consultant comments:

 “It is likely that the recent Employment Appeal Tribunal case will be taken to the European Court of Appeal and we await a formal response from a Government taskforce which will issue guidelines on this matter.

 Moving forward this will affect employees who have a basic wage and guaranteed overtime and potentially shift premiums and where Companies have only been paying holiday pay on basic wage – which is, in the main, manufacturing businesses but not exclusively. Staff who receive a fixed weekly/monthly wage are not affected.

 If as an employer you require help in assessing “normal pay” and whether a claim may arise, or in considering what actions you can take to redress the situation, please do contact Ursula direct on 01332 365855 or ursuale@batesweston.co.uk.

 This article is general in nature and you should take no action without discussing your own circumstances with your professional advisors.