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Calculating holiday pay. Should overtime be included?

Posted on 6th August 2014
Case law

Any employer who pays overtime or commission is closely following a number of cases about what should be included in the holiday pay calculation. Below is the latest instalment.

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Julie Temple Julie
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the question is whether the EAT can interpret the Working Time Regulations 1998 (WTR) to give effect to the decisions of the European Court

Bear Scotland Ltd v Fulton; Hertel (UK) Ltd v Wood; Amec Group Ltd v Law [2014] EAT

Last week, between 30 July and 1 August 2014, the President of the Employment Appeal Tribunal (EAT) was hearing submissions about whether holiday pay should include overtime. I was hoping (but not expecting) that the EAT would give its decision so that employers have some much needed certainty. That has sadly not happened.

The question for the EAT

From what I understand of various accounts of the three days:

  • the question for the EAT is not whether overtime should be included in calculating holiday pay. I tend to agree. That much is clear from decisions of the European Court on calculating holiday pay.
  • the question is whether the EAT can interpret the Working Time Regulations 1998 (WTR) to give effect to the decisions of the European Court or must Parliament intervene to change the WTRs.
  • if it can interpret the WTR, another question the EAT must consider is how far back can claims for back-pay go. This is the million dollar question. The options include to 1998 when the WTR were introduced; six years based on the time limit for contractual and statutory claims under the Limitation Act 1980; or when a worker last took more than four weeks' holiday in any holiday year (for technical reasons I will not go into this).

Decision likely before the end of year

The EAT has given one of the parties the opportunity to present written submissions. These are not likely to be received by the EAT until September 2014, with a decision to follow in October 2014. Honestly this is a tall order and a decision should not be expected until the end of the year. We will keep all our readers up to date with developments and let you know the decision when we do via our free employment law update bulletin, hrlegalnews. Click on the link to sign up and get the news straight to your inbox.

What can you do whilst you wait?

Our feature article on holiday pay and commission outlines some of the steps that you can be taking now to work out your potential future exposure and also consider claims you may face for back-pay. If you want to assess the risks in your organisation speak to one of our specialist employment law solicitors now. They will discuss with you what you can be doing now to minimise your exposure. You can be sure your employees are exploring their options.

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