Overtime Payments To Be Included In Holiday Pay

Overtime Payments To Be Included In Holiday Pay


This week, the Employment Appeal Tribunal has ruled in favour of workers to include regular overtime in holiday pay.

Under EU law, workers are entitled to four weeks’ holiday pay a year, but details on how this holiday pay should be calculated have been vague. Until now, many UK companies have calculated holiday pay based on an employee’s basic rate of pay, meaning additional regular overtime payments haven’t been taken into account.

The Tribunal have ruled that this is incorrect. Not including overtime payments in the holiday pay calculations, has resulted in employee’s receiving considerably less pay when they take their holidays, to when they were working.

The main points of the judgement are:

  • Non-guaranteed (voluntary) overtime must be included in holiday pay calculation
  • This will only apply to the 20 days statutory leave dictated by European Working Time Directive and not the additional 8 days that workers are entitled to under domestic WTR
  • The potential for back-dated claims has been limited to three months following the last incorrect payment

It should be noted that while the Employment Tribunal has ruled in favour of the workers, the companies involved can still appeal against the decision, meaning there could be a period of uncertainty.

At Cummins Mellor, our temporary employees are paid in accordance with the Employment Rights Act 1996 which states, “if a worker does not have normal hours of work, the amount of a week’s pay should be calculated on an average of the worker’s total pay received over the previous 12 weeks where pay is received,and this will therefore include overtime rates”

We have every confidence that this ruling will not have any effect on our operations.

For more details, please click here to visit the ACAS website

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