Employers calculating holiday pay should now include overtime

In November 2014, workers from a road maintenance company called Bear Scotland, won a ground-breaking case at the Employment Appeal Tribunal. This set a precedent that overtime should now be included as part of holiday pay. The case was heard jointly with cases against Hertel (UK) Ltd and Amec Group Ltd. The case arose due to unauthorised deductions from wages of two employees, David Fulton and Douglas Baxter. The employer failed to include overtime and other payments associated with their work in calculating the holiday pay due to them. All three cases won their original claim and the tribunal rejected the companies’ appeal.

 

In summary the EAT has held the following –

 

• Non-guaranteed and guaranteed overtime should be included when calculating their minimum four week statutory holiday pay. It is not specified what happens in the case of voluntary overtime.
• It concluded that the Claimants could claim the arrears of pay as being unlawful deductions. This means that workers can make backdated claims. Although these claims  have to be made within a limited period (three months from the last deduction from wages).
• Travel and other taxable allowances paid to workers should be included in holiday pay.

 

The court of appeals’ verdict has widespread implications for companies who require employees to do overtime on a regular basis.

 

The coalition have argued strongly against the tribunals verdict. Business leader John Cridland (CBI director general) stated –

 

‘This is a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds – and not all will survive, which could mean significant job losses’

 

The Office for National Statistics have provided data which highlights the extent of the issue.