Important Holiday Pay Update

You will no doubt have seen the significant amount of media coverage about the judgement reached in an Employment Appeal Tribunal about holiday pay.  In summary it has confirmed that staff who are required to work overtime should have that overtime accounted for in their holiday pay calculation.
 
What does this mean for you and your staff?
• Where you require staff to work overtime (including non-guaranteed overtime), you must take account of the resulting increased pay (i.e. including overtime payments) when calculating the “normal pay” for the purposes their holiday pay. Often a requirement to work overtime is expressly stated in the contract of employment
• You will only be required to apply this to the first 4 (four ) weeks of annual holiday pay (pro-rata for part time staff)
 
What action do we recommend you take?
• If you have a contractual right to require your staff to work overtime, you should now take account of additional overtime in the calculation used to determine their holiday pay.
• If you calculate the weekly holiday pay by reference to what the employee has actually been paid, on average, over the 12 weeks immediately preceding their holiday date. As a result, the pay the employee receives on their holiday will take  account of any overtime that has been worked by the employee
• Where necessary, you ensure that  your payroll provider or internal payroll staff are aware of this issue to avoid underpayments being made going forward
 
What to be aware of
• Be aware that staff who have not had overtime pay accounted for in their holiday pay calculation, to date, may be entitled to bring a backdated claim for Unlawful Deductions from Wages against you as their employer (subject to certain conditions) to recoup lost payments
• If you have staff who you know will now be entitled to increased holiday pay, be aware of the risk and potential liability that you may face with regard to backdated claims for unpaid holiday pay
• This does not apply to any one who is self employed
 
This is intended as a brief updating summary. However, if you are in any way unsure or concerned about this recent development then please do not hesitate to contact us.