What makes up holiday pay?

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Many employers mistakenly believe that a day’s basic pay constitutes a day’s holiday pay. However, at an Employment Tribunal a decision was made which clarified what earnings actually make up holiday pay. The ET in the case of Neal vs Freightliner Ltd stated that the EU Working Time Directive had to be considered. This states that holiday pay should reflect the amount of pay the individual would have received had they been at work. So if overtime, shift payments, other allowances would have been paid to the individual on a regular pattern then these payments are counted as ‘normal earnings’ and therefore included when calculating holiday pay. John Lewis too have been caught out and had to put aside a huge amount of money to pay back their staff on under paid holiday pay. At the time of writing the employer had appealed against the decision so it may be that this is not yet the end of the matter.

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