Holiday Pay: Landmark Judgment
Employment Appeal Tribunal rules that overtime should be included in holiday pay
Workers have today (4th November 2014) won their Employment Appeal Tribunal (EAT) case requiring employers to recognise overtime as hours for calculating holiday pay. Full details of the ruling, such as whether claims can be backdated, are yet to be released.
The landmark decision follows cases brought by employees of the industrial services company Hertel, the engineering firm Amec and road maintenance business Bear Scotland. EU law provides for four weeks’ holiday pay a year, although it does not prescribe how this should be calculated. The UK has interpreted the law as requiring holiday pay at the basic rate. However, “basic rate” is not easily definable. Today, however, the EAT has stated that voluntary overtime and on-call time is to be assessed as “basic rate”. This follows the recent European Court of Justice ruling against British Gas which stated that staff who receives commission as part of their earnings should have this taken into account when holiday pay is calculated.
This ruling potentially has far reaching repercussions. According to government data, 1/6 of those in employment get paid overtime, meaning that around 5 million workers could be entitled to more holiday pay. Due to the huge financial implications for companies, an appeal to the Court of Appeal is likely. Further, the Coalition strongly opposed this interpretation, meaning that emergency legislation could also follow.