Judgment on holiday pay cases
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Judgment on holiday pay cases
The EAT has this morning handed down its judgment in relation to holiday pay. The headline conclusions are:
- Statutory holiday pay must include overtime
- Claims might not be able to be backdated for many years (as has been the concern of employers)
Workers must be paid their ‘normal remuneration’ during periods of statutory holiday (i.e. the four week minimum under European law). This is their typical average pay not just basic pay as previously thought. So overtime (and other typical) payments must be included in workers’ holiday pay.
Unfortunately, this means that a large number of workers who have only been paid basic pay for holidays in the past could have unlawful deductions from wages claims. However, importantly, the EAT has ruled that if there is a gap of more than three months in any alleged series of deductions, then this will break the series and the worker will not be able to claim for earlier deductions. This may therefore restrict the ability of some workers to bring valuable retrospective claims for underpaid holiday pay.
So, it’s not great news for employers in terms of overtime having to be included in holiday pay going forward. But in terms of retrospective claims, there may be good news if employers can point to a gap of more than three months since the last deduction (i.e. the last time the employee took statutory holiday and was underpaid). I will be posting a fuller article on this subject in due course.
We are also running a special seminar on this issue on Tuesday 18 November 2014 at 4pm. Please contact us for further details or check the Paris Smith HR Network LinkedIn Group.