Employers must include overtime in holiday pay

Following a recent Employment Appeal Tribunal ruling around five million employees could be eligible for backdated holiday pay after it was found that employers should include overtime when calculating holiday pay.

The tribunal ruled on three cases — Bear Scotland v FultonAmec v Law and Hertel v Wood  — and found that employers shouldn’t take into account basic pay only when calculating how much their staff should be paid while on holiday.

The decision was made because in two of the cases employees had worked overtime consistently, but it hadn’t been included in their holiday pay so they had received “considerably less” pay when they were on holiday in contrast to when they were at work.

Employment lawyers have told employers, however, not to worry that they will be making massive payouts. Lisa Bryson, from A&L Goodbody, has said that business owners must take a measured approach:

"To a degree, it's actually welcome news to employers because the ruling was that any underpayment of holiday that occurred more than three months ago wouldn't be counted, so that appeared to limit the potential financial exposure."

In fact, any claims from employees must be made within three months of the deduction or three months of the last of a series of unlawful deductions. The ruling also stated that the extra eight days of holiday staff are due will not be included.  

However, this ruling isn’t the end of the matter, as the right to appeal has been granted and it’s expected that it will be pursued in the future.

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Published on: November 17, 2014

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