The latest ruling on holiday pay from the Employment Appeal Tribunal in the case of Bear Scotland held that regular overtime should be included in the calculation of holiday pay. This leaves many unanswered questions and countless employers around the country are confused as to what action they should take, if any, and when, to avoid backdated claims from employees amounting to thousands, if not millions of pounds. Backdated claims can only be made if it is less than 3 months since the employee’s last holiday, or last incorrect payment (a payment not including regular overtime).
There are a vast number of different ways of remunerating employees for example bonus or commission payments, shift allowances and performance pay. Difficulties arise in assessing these types of payments beyond basic salary that make it hard to know whether or not they should be included in the calculation for holiday pay. What if more overtime is done in certain months? Should it be annualised instead of calculating an average over a 12 week reference period, the same as the calculation for a week’s pay under the Working Time Regulations?
The other difficulty is to what period of holiday this ruling applies. A full time employee is entitled to 5.6 weeks statutory holiday. This is made up of 4 weeks’ ordinary leave and 1.6 weeks’ additional leave, being the 8 bank holidays per year. Should employees be paid overtime etc for 4 weeks’ or the full 5.6 weeks’ statutory holiday?
There are different ways to view holiday pay and its tactics depending on if you are an employee or employer. If you work for a business, one thing that every business should be doing in any event is an audit of the potential costs should the employees make claims for backdated holiday pay. Once the size of the problem has been assessed, then you can decide whether to act or not. We can advise both employers and employees as to their options regarding holiday pay. Please get in touch to discuss now before it’s too late on 01892 525 353 or email@example.com