Overtime & Holiday Pay – rhw Briefing                                                                       

A recent ruling of the Employment Appeal Tribunal (EAT) provides that regular overtime is to be included in holiday pay.

What does this mean?

  1. Employers are to include, when calculating holiday pay, non-guaranteed overtime.  This includes overtime that the employee is contractually obliged to undertake when offered by the employer but where the employer has no obligation to offer such overtime.
  2. It is uncertain from the EAT decision, whether or not voluntary overtime is to be taken into account when calculating holiday pay
  3. Overtime should be taken into account when calculating holiday pay for the four weeks’ holiday which workers are entitled under the Working Time Regulations, but not for the additional 1.6 weeks’ entitlement afforded under domestic legislation.

Backdated Claims

It is apparent from the recent EAT decision, that employees will not be able to claim after 3 months from their last incorrect holiday payment.  This limitation may allow for employers and employees to settle any disputed incorrect holiday payments.

However, there is potential for individuals to bring claims for breach of contract for up to six years if it can be shown that holiday pay, which includes overtime pay, forms part of their contract.

Will the EAT decision be Appealed?

The EAT decision is open to appeal in the UK Court of Appeal and potentially the European Court of Justice.  This will ultimately take some time to conclude.  In the meantime, as the recent EAT decision has been made, employers should take into account overtime when calculating holiday pay and ensure they have procedures in place to deal with this.

For more information on this subject or any other area of Employment Law please contact David Denovan-Smith (david.denovan-smith@rhw.co.uk) 

The contents of this article are for the purposes of general awareness only.  They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.  Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances