Overtime to form part of worker’s holiday pay

Halesowen based chartered accountants Nicklin LLP is warning employers of an Employment Appeals Tribunal which has ruled that voluntary overtime payments should be taken into consideration when calculating a worker’s holiday pay entitlement.

As a result of the recent ruling in Bear Scotland vs Fulton and others, approximately five million workers in the UK could be entitled to more holiday pay at a potential cost to companies of billions of pounds.

Harvey Owen, managing partner at Nicklin LLP, said: “The employment judge hearing the case agreed with the claimants and ruled that all overtime payments should be taken into consideration when calculating holiday pay. The decision was appealed and the case was heard earlier this year with the Employment Appeals Tribunal upholding the initial judgment.

“Prior to the decision only basic pay has counted when calculating holiday pay.

“The decision is expected to have huge ramifications for all companies whose workers carry out overtime above their contracted hours. With one sixth of the 30.8 million workers getting paid overtime, a significant number of claims can be expected as a result of the judgment.”

It is anticipated that the ruling will be appealed to the Court of Appeal or referred to the EU Courts in Luxemburg for clarification on how European law should be interpreted.

However on previous referrals, the EU Courts have ruled that commission and bonus payments should be included in holiday pay which may provide an indication as to their potential approach if the decision is referred.

With either an appeal or referral likely, it may be some years before a final decision is made on whether overtime should form part of holiday pay.

For advice and information on calculating employee’s holiday pay, please contact us.

Posted in Nicklins News.