Overtime Should Count in Holiday Pay, Landmark Tribunal Hearing Rules

Millions of workers could now have their holiday pay recalculated to take into account overtime.

Businesses are now facing a multibillion-pound bill as a tribunal ruled today that overtime should be taken into account when holiday pay is calculated.

The Employment Appeal Tribunal (EAT) has ruled that it is wrong for employers to only take into account basic pay when calculating how much an employee should be paid while they are on holiday. Workers can now make backdated claims, but only if it is less than three months since their last holiday or incorrect payment.

Under EU law, staff are entitled to four week’s holiday pay a year, but there are no details on how It should be calculated. The UK interpretation of the law is that holiday pay should be at the basic rate and that it is a grey area for those who work overtime or receive variable pay.

The EAT ruled that voluntary overtime and being on stand-by for emergency call-outs should be included when calculating holiday pay. Around five million workers – 1/6 of the total UK workforce currently do overtime.

UK holiday entitlement: What are workers allowed?

  • Almost all full-time workers are entitled to 5.6 weeks paid holiday, employers can include bank holidays as part of a worker’s annual leave.
  • Self-employed workers are not entitled to annual leave.
  • Employees working a five day week must receive 28 days of paid annual leave a year.

If you have any queries about the content of this article, telephone us on 0161 330 6821 or contact one of our employment experts directly:

Mark Hirst: mhirst@bromleys.co.uk

Rachael Frankland: rfrankland@bromleys.co.uk