Overtime Now Considered When Calculating Holiday Pay

Hakan Enver 05.11.2014

It’s good news for workers, as a new ruling says overtime has to be taken into account when calculating holiday pay. Guest blogger and employment lawyer, Philip Landau, of Landau Law Solicitors, looks at this new development.

In a landmark ruling by the Employment Appeals Tribunal, employers will now have to take into account your total levels of pay, including overtime, when calculating your holiday pay - regardless of what your contract states. The ruling was made after test cases brought by the Unite union against the engineering company Amec and industrial services firm Hertel.

Up until now, only your basic earnings were used when working out your holiday pay - not your overtime. This is not withstanding, as in some industry sectors overtime accounts for a large part of salary, thus has effectively resulted in a drop in income during the holiday period.

This is welcome news for the approximate 5 million workers who regularly receive paid overtime. There is uncertainty regarding how the new holiday pay will be calculated, and the matter has been referred back to the original employment tribunal to assess the same.

There has been talk of the new judgment giving workers the opportunity to claw back holiday pay from their existing or old employers, as far back as 1998.There has been talk of the new judgment giving workers the opportunity to claw back holiday pay from their existing or old employers, as far back as 1998, when the Working Time Directive came into force. This is unlikely to be possible at the present time, although the Court of Appeal will making a ruling on this. At present, you can only make an unlawful deduction of wages claim if the last, or last in a series of deductions, was made within the last 3 months. If you haven’t taken holiday in 3 months, you may therefore not be able to take into account the new ruling- although the tribunal does have a discretion to allow claims to be made out of time where it was not suitably practicable to make an application earlier. 

The ruling means that employers will have to change how they calculate holiday pay in future to take account of voluntary overtime- whatever the provisions in your contract of employment. This is at least until (and if) the decision is overturned in a future appeal of the new judgment.

Philip Landau, Employment Lawyer

 

Philip Landau is an employment law solicitor and partner at London firm Landau Law, Solicitors. Follow him on Twitter at @philiplandau or on LinkedIn.

 

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Hakan Enver's picture
Managing Director
henver@morganmckinley.co.uk

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