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‘Keep calm and carry on’ advice on holiday pay ruling

The Employment Appeal Tribunal (EAT) has made a decision regarding holiday pay and overtime that may have a huge impact on employers in the UK - but dealers are being advised to take no action, but be prepared for staff questions.

The EAT ruled recently on its interpretation of the Working Time Directive that overtime pay should be included in pay for holiday leave.

Ruling summary:

> Both guaranteed and non-guaranteed overtime should be included when calculating the amount of holiday pay due to an employee. The regulations state that an employee should be paid ‘normal pay’ whilst on holiday - what this ruling has changed is that ‘normal pay’ is now deemed to include overtime if overtime is normally paid.

> Overtime pay should only be included in respect of the 4 weeks’ minimum holiday entitlement derived from European law. UK statutory minimum holiday provides an additional 1.6 weeks but there is currently no requirement to include overtime pay in this.

> Employees will usually only have 3 months from the date of underpayment to make a claim. Legal experts are saying that it will be difficult for employees to claim underpayments of holiday stretching back several years, as some newspapers have reported.

Eilean Hamilton, HR consultant at MHA MacIntyre Hudson, said to dealers: "Take no action yet. The decision will almost certainly be appealed, in which case it will be considered by the courts for another year or two.

"If you have questions from employees, the current advice is to state that you are aware of the decision and will keep up to date with any appeal process.

"Tell those that ask, the Government has set up a task force to advise on the issue so until an appeal decision is made or there is further Government or legal advice, the company will not be changing the way in which it calculates holiday pay."



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Comments

  • Stacey Carter, Employment Lawyer, Napthens LLP - 15/11/2014 10:55

    I would totally disagree with this advice to take no action. Although the decision will be appealed, the UK courts are bound to follow the European ruling on how holiday should be calculated, and Europe have directed that holiday pay should reflect 'normal pay' which can include commission, overtime and allowances. So although this case will be appealed, the principle of including both guaranteed and non guaranteed overtime will undoubtedly be upheld. My advice to employers is therefore to take action now. See further details at http://www.napthens.co.uk/update/holiday-pay-overtime-important-update/

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    • katie.burman_mhllp.co.uk - 21/11/2014 16:32

      It is clear from all that we have seen published on this matter since the announcement of the judgement that there are clearly two camps of opinions on what employers should do. Many have supported the view of not doing anything (which we suggested) but it is acknowledged that this does leave a potential risk of claim (there is much debate over what the scale of such a claim may be) if and when the case is finally decided (which may be some years away). The other camp are suggesting the revision of contracts which in doing will not be straightforward and may generate possible unrest with employees who may be suspicious over attempts to revise a contract to prevent any future claim. We suggest that employers who have concerns need to take individual advice and weigh up what is best for them. Alastair Kendrick and Eilean Hamilton, MHA MacIntyre Hudson

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