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UK Holiday Pay Ruling - Overtime Counts!

By Practice Group Leader, Employment

The Employment Appeal Tribunal today ruled that overtime must be taken into account when calculating holiday pay. 

Business Secretary, Vince Cable announced today that the Government will be setting up a taskforce to assess the impact of the judgment.

Today’s decision means that people who regularly work additional hours, understood to be around one sixth of the UK workforce, will be financially better off. This is welcome news in the approach to Christmas, particularly for retail staff who work substantial overtime hours during the festive period.

There is now no question that a failure to pay workers normal pay, including variable payments such as overtime and commission during holidays is against the law. Workers who have not been paid correctly have the right to insist on proper pay and could make a deduction from wages claim in an Employment Tribunal.

Some UK employers may be facing considerable back pay claims which could go back as far as 1998 in relation to underpaid holidays.

However, the Employment Appeal Tribunal (EAT) made some findings which are likely to substantially impact the scope and value of back pay claims. This includes the finding that a gap of more than three months in any series of deductions will mean the worker loses the right to make a claim for the earlier deductions.

This means that if there has been a gap of more than three months between holidays, which is often the case, then the chain of deductions for back pay purposes is broken and the worker cannot make a claim going any further back. Aspects of the decision are expected to be appealed by both sides.

It is still undoubtedly welcome news that the ruling, which was handed down in respect of three cases (Bear Scotland Ltd v Fulton, Hertel (UK) Ltd v Wood and others, and Amec Group Ltd v Law and others) will give rise to a substantial increase for the future in entitlement for millions of UK workers as well as potentially very valuable claims for back pay.

The decision follows the European Court ruling earlier this year in the Lock v British Gas Trading Ltd case which found that workers must take into account commission during periods of statutory holidays.

Paula Chan is an Employment Solicitor at Slater and Gordon Lawyers in central London. Slater and Gordon are the No. 1 ranked employment law firm for individuals in Chambers & Partners 2014.

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