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21st October 2016

Legal Issues – Holiday Pay

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Holiday pay has been a hot topic for some time now, with the focus being primarily on whether additional types of pay such as overtime and commission should be included when calculating holiday pay.

So far the decision in each of these cases has said the same thing, namely that additional payments that form part of an employee’s normal remuneration should be included in the calculation of holiday pay.

One of the more well-known cases is Lock v British Gas. Mr Lock’s commission payments make up around 60% of his income and he has been arguing that the commission payments ought to be included when calculating his holiday pay. We have already seen decisions from the Employment Tribunal and Employment Appeal Tribunal agreeing with him, and the decision at the Court of Appeal is no different.

The Court stated that the Working Time Regulations (WTR) (UK law) should be interpreted to give effect to conform to the Working Time Directive (the EU law on which the WTR are based). In short, results-based commission should be included when calculating holiday pay. Or, more accurately, when calculating four weeks’ holiday pay; any holiday entitlement above that is not affected by this ruling.

Another recent case in relation to overtime has also been decided in line with other similar cases. In Brettle v Dudley Metropolitan Council the claimants worked a variety of different shift patterns and received a variety of payments for voluntary overtime. The verdict itself was perhaps unsurprising in that the judge decided that regular overtime (including purely voluntary overtime) should be included in the calculation of holiday pay.

What may be more surprising is that, in this context, ‘regular’ included overtime that was worked even as infrequently as once in every four or five weeks.

With these and earlier decisions in mind, employers who are not including overtime and/or commission when calculating holiday pay may wish to consider changing their practice.

If you have any questions on any of the issues raised in the above article, or would like to discuss taking reasonable steps in your own workplace, please contact Seanpaul McCahill.

21st October 2016