Overtime and holiday pay

Overtime and holiday pay

The Appeal Tribunal has released its judgment today in the much awaited case concerning whether voluntary overtime should be included when calculating holiday pay.

If you have the inclination to read the judgment there is a link below, focus on issue 1 and 3, which should make the reading easier.

In short, voluntary overtime (overtime that is not compulsory) MUST be included when calculating a worker’s holiday pay. The complicating factor is that this is for the first 4 weeks (or 20 days) of holiday pay, not the full 28 days in any one year.

The second point is how far back can an employee now claim for underpaid holiday pay? The answer is as far back as they worked, or since the introduction of the Working Time Regulations in 1998. However, if the employee has a gap of more than three months between any two holidays, then that three months is the back stop point, the point beyond which the employee cannot go back in claiming underpayments.

The message from us is that from now on, use overtime regularly worked when calculating holiday pay. Look back over the 12 weeks prior to the holiday and base holiday pay on the average hours worked. Do NOT change the contract, just say that you are doing this to keep in line with current law, but it has not changed the contract. This way, if this gets further appealed (and it might) then you are not bound by the increase in holiday pay.

There is also reference to the same point when calculating pay in lieu. We will update you when we have digested the full judgment.

The full decision can be read at the following link (once the ink is dry).

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