Previously, workers have only been entitled to holiday pay based on their normal basic pay.
Q: What has changed?
A: Some workers may be entitled to a higher pay rate.
- A court ruling this week says that holiday pay should be based on “typical average pay” and therefore should include overtime pay if the worker is obliged to complete the overtime when asked.
- Recent European cases have also decided that holiday pay should include pay that is “intrinsically linked” to a worker’s tasks. For example, one case decided that a salesman should be paid his average commission during periods of annual leave.
Q: Is this the settled position?
- The decision will no doubt be appealed particularly as the case also decided that claims for arrears will be out of time if there has been a break of more than three months between underpayments
- The government is setting up a task force to “assess the impact of the ruling”.
Q: What should you do?
A: Assess the impact on you.
- It is premature for employers to change their holiday pay arrangements or offer compensation to employees as this decision is unlikely to be the last word on the subject and you should tell this to your employees. We can prepare a notice for you.
- Financial planning should factor in your potential exposure from this decision.
- Contracts of employment and working practices should be reviewed to establish which payments will affect holiday pay calculations in the future. We can meet with you to discuss likely impact and risk and create a strategy.
For further information or advice, please contact Sarah Furness on 0191 232 8345 or email: firstname.lastname@example.org