More money for holiday pay
Does your company ask people to work extra hours for paid overtime? If the answer’s yes, then it could mean changing the way you calculate holidays.
A ruling by the Employment Appeal Tribunal might mean that people who regularly get paid overtime for working extra hours should be paid at that higher level when they take holiday.
Previously, holiday was only based on the hours that an employee was contracted to work. So even if employees regularly worked extra hours each week as overtime, it did not count when they took time off for holiday.
This means that when taking holiday, employees’ pay dropped to their basic level and not the amount they received when they were at work, which was higher because of the overtime pay.
As an example, if you have a part-time employee working 4 days a week who regularly works on a 5th day most weeks, then is that person really a part-time or a full-time worker? The employee will be paid to work full-time usually but only paid part-time when taking holiday. This ruling means the employee is treated as a full-time worker for holidays too.
So what does it mean?
- It means the amount of pay that employees get during holidays will be based on the actual hours they are paid to work including overtime.
- It’s going to depend on companies’ decisions about paying for overtime.
- It’s not a final decision.
This is a long-running legal case and it’s likely to continue for another few years before a final decision, because it will affect so many businesses and millions of workers. Unions, the Government and business organisations all have stakes in this.
There was a similar ruling about including bonus and commission payments when calculating holiday pay in May 2014. Again, that’s not a final decision.
However, employers should consider reviewing their practices around overtime and holiday pay quickly because delaying decisions might risk getting larger back-dated claims for money owed in the future.
For more information, here are links to articles on the BBC, Guardian and Personnel Today HR magazine.
UPDATE The Government has set a two-year limit for any backdated holiday pay claims. The limit will take effect in July, so potentially there could be larger backdated claims made before this. Here are links to articles in Personnel Today and HR Magazine.