Any holiday pay an employee receives must now be calculated to include normal earnings and not just their basic salary, so an Employment Appeal Tribunal has recently ruled.
The recent case concerned a worker who regularly undertook overtime, on a weekly basis. The matter to be decided was whether the worker should receive basic salary only or should also have included overtime payments during the relevant reference period.
The court decided that he should and clarified the type of payments that need to be included in the calculation. These are, shift payments, overtime payments, travel supplements and sometimes bonuses. The latter, along with commission payments, are more complex. Generally discretionary bonuses will be excluded for the calculations, and the matter of commission payments come before the court next year.
Before reaching for the spreadsheet, there are two important points to note;
- These inclusions only apply to the statutory holiday entitlement of four weeks, not to the additional 8 days, which were previously the bank holidays.
- Generally, the recovery of underpayments can only be made if they occurred in the past three months. Those that happened prior to that are unlikely to be recoverable. However leave has been granted for this point to be appealed.
For the moment therefore, it is no possible for applications to be made to backdate claims, thereby burdening business with significant cost but we wait the outcome of the appeal.
If you have any questions about this decision and holiday pay and how it might effect you, do give us a call on 08700 434 284.
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