Overtime Should Be Taken Into Account When Calculating Holiday Pay
The Employment Appeals Tribunal (EAT) has recently given its Judgment in the cases of Bear Scotland v Fulton, Amec v Law and Hertel v Wood (connected cases).
It held that overtime payments, even if they are not guaranteed, should be taken into account for the purposes of calculating how much holiday pay an employee is entitled to.
Before this Judgment, only basic pay counted when calculating holiday pay.
It is noteworthy that this new method of calculation only applies to the basic four weeks’ leave that is provided for under the Working Time Directive (EU law). It does not apply to the additional 1.6 weeks that employees are entitled to in accordance with Regulation 13A of the Working Time Regulations 1998 (UK law).
The EAT confirmed that claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments of holiday pay. Although the Employment Tribunal would have discretion to allow claims that would otherwise be out of time in certain circumstances.
Finally, payments for “travel time”, which exceed expenses incurred, and would therefore amount to additional taxable remuneration, should also be taken into account when calculating holiday pay.
The EAT refused to grant a reference to the Court of Justice of the European Union, but gave permission to appeal to the Court of Appeal, stating the most significant point for the Court of Appeal to consider was that in relation to potentially out-of-time claims (above).
Considering the impact that this could have on many businesses, it is likely that that there will be an appeal to the Court of Appeal, and a final decision in this matter could be many years away.
However, if the decision is upheld, or if an appeal is not pursued, this ruling could potentially open the floodgates for employees to claim holiday pay going back years. Maybe even as far back as 1998, when the Working Time Regulations came into force.