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Your Questions AnsweredPosted on by Angela Rhodes
Q: Do employers have to include extra payment for overtime and commission payments when calculating holiday pay?
A: The Employment Appeals Tribunal (EAT) has ruled that whatever “normal pay” a worker is entitled to must be reflected in the pay they receive when they take holiday. The EAT gave leave to appeal to the Court of Appeal so this issue is far from being settled yet. However, it is clear that moving forward, employers are likely to be at risk of a claim for unlawful deduction from wages if they do not include the additional elements paid to their employees during their normal working time other than basic pay.
The judgement clarified that any employee making a claim must have had an underpayment in their holiday pay within three months of them lodging a claim in the employment tribunal and if the claim was for a series of underpayments, they will only be valid if there has been a break of no more than three months between the underpayments.
Whilst waiting for the result of the appeal against this judgement to the Court of Appeal, we recommend that employers make a decision as to what they are going to pay in the future whilst being mindful of the potential liability for historic payments that may be required and calculating what that liability might be as claims could be made going back over a signficant period of time, potentially as far back as 1998.
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