New holiday pay ruling is a bonanza for workers

If you work voluntary paid overtime, a landmark decision today means you should receive additional holiday pay to reflect this.

The Employment Appeal Tribunal today ruled that a worker’s overtime should be factored in when making holiday payments- regardless of what your contract of employment states.

Until now, an annual leave payment could be calculated purely on the basis of a worker’s basic pay to reflect any contractual hours worked, discounting any overtime.  This means that those who regularly work overtime are often paid much less when they are on holiday.

The decision is in many ways a result for employees – and for those whom overtime is very much a regular part of their income, it could make a real difference.  The extent to which employees can bring a claim for backdated pay stretching back many years is, however, yet to be decided (this is likely to be considered by the Court of Appeal).

At present, in order to bring a claim in respect of unpaid (or reduced) wages, you have 3 months less one day from the date of the reduced or unpaid wage to bring a claim. This is  known as a claim for “unlawful deduction from wages”. There may, however, the possibility for bringing a claim for holiday taken prior to this 3 month period if it can be argued that the most recent deduction (within the last 3 months) was the last in a series of unbroken deductions.

Whilst unions have praised the judgment as a victory for workers, this understandably spells bad news for employers. So much so, that a taskforce of representatives from government and business has been set up to discuss how best to limit the impact of the ruling on business. Calculating holiday pay in accordance with overtime could prove not only extremely costly, but also a logistical minefield if the ruling means workers were encouraged to book holidays following good overtime periods as it would enhance their pay. There are fears that the ruling could go so far as to force companies into administration.

In response to such “scaremongering”, Frances O’Grady, general secretary of the TUC, has pointed out that companies have been resilient to wide sweeping legislative changes to protect employees in the past”.

It is likely that the decision will be appealed, which means today’s judgement will be overturned, but in the meantime, it remains good law.

By Emma Beresford, Employment Lawyer at Landau Law Solicitors

For more information on your employment rights and a free consultation, please get in contact on 020 7100 5256 and ask to speak to Philip Landau or any member of the employment team, or email us.


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