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Cost of holiday pay goes up for employers – now includes some overtime

March 26, 2015 9:40 am Published by Leave your thoughts

In November 2014 an Employment Tribunal Appeal (EAT) judged that employers should include overtime in workers’ Holiday Pay .  Shortly after the Government announced it was setting up a Taskforce to look at the implications of this issue for employers, in the meantime, Companies need to get on with changing their practices.

This whole matter falls into the European Working Time Directive, and UK Working Time Regulations (the difference between the two is important – see our News).  Although it may feel like it, the EAT decision did not make new law. The EAT said that the Working Time Directive was being incorrectly interpreted – which is where the concern about back-pay claims came from, because this meant holiday pay may have been incorrectly calculated since 1998.

Companies will now need to start adopting the practice of including overtime (compulsory and semi-voluntary), shift, stand-by, on-call, bonus and travel time payments into workers’ holiday pay.  For the time being, commission pay is not included but it’s still possible that it will be next year (check the update at the foot of the page).

Calculations for holiday pay will be made using a 12 week reference period to include all the above pay, but only has to be applied for the 4 weeks of leave provided by the Working Time Directive. (Read more in our News.)

There is a bit more information on the News Page of our website (including an update about Unite’s appeal) – have a read and ring us with any questions at all.  We’re in the office on 0845 463 3231.

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