Ruling on Overtime Payment in Holiday Calculations

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employee holiday

The current situation regarding the calculation of holiday pay is that only basic pay counts. However, today the Employment Appeals Tribunal has announced that overtime payments should be taken in to account when calculating holiday pay for the basic four weeks’ holiday that is granted under the Working Time Directive.

What exactly does this mean?

This means that any employee who regularly works overtime can claim additional holiday pay and workers can make a backdated claim for a particular three-month period. Claims for arrears of holiday pay will be out of time if there has been a break in excess of three months between successive underpayments.

The impact of this ruling could be massive for some employers and Vince Cable, Business Secretary, has already stated that he will be setting up a task force to assess the impact of the ruling as a matter of urgency. It is highly likely that an appeal will follow and so it could be some time before a final decision is made.

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