Overtime should count in holiday pay

2014-11-04 Jennifer Renney-Butland posted:

You may have heard or seen in today's news that the Employment Appeal Tribunal (EAT) has just decided that employees' holiday pay should include their overtime pay as well as basic salary when calculating how much someone should receive when they are on holiday.

You may also have heard several business leaders including John Cridland, Director General of the CBI describe the court's decision as:

A real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds - and not all will survive, which could mean significant job losses.

The detail of the judgment contains some positive news for businesses when it comes to how far back the payments can be backdated and just how much holiday can be claimed.

Philip McCabe, Senior Associate Solicitor comments: The employers lost on their main arguments, as the EAT decided that holiday pay should be based on typical average pay and that it will need to be calculated to include overtime and similar payments in the future, subject of course to any appeal.

However, Jennifer Renney, Principal Solicitor sees the judgment as limiting the ability of workers’ to claim back payments: claims of back pay will not be possible if there has been more than a three month gap between someone receiving holiday pay where there has been this kind of shortfall. The EAT also held that the recalculation of holiday pay is limited to four weeks’ basic leave rather than the 5.6 week’s leave employees are permitted to take.

Whether someone is entitled to a back payment or not will depend on their individual circumstances. When you have an employee asking about backdated holiday pay, we can advise you on whether they qualify or not. Contact us on 01225 632240 or email jennifer@renneyandco.com or philip@renneyandco.com.

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