How will the new Holiday Pay Ruling affect me?

What were the cases about?

Earlier this year, this discrepancy between British and EU law was highlighted when a British Gas worker took his case to the European Court of Justice. His normal pay was made up of basic pay and sales commission, yet he was only receiving his basic pay whilst on holiday. 

Additionally, employees from the companies Bear Scotland, Amec and Hertel all appeared before the UK employment appeal tribunal, questioning their holiday payments too. They called for their holiday pay to include overtime and commission – which is in line with their average earnings.

What was the decision?

The tribunal ruled in the employees’ favour, deciding that article 7 of the Working Time Directive meant that in these cases, overtime was part of the workers' “normal” earnings and therefore should be included when calculating holiday pay.

The ruling has set a precedent for how employers’ holiday pay should now be calculated, and with millions of workers in the UK regularly working paid overtime, it’s a change that could have a massive effect.

What does this mean?

The ruling will not result in an immediate payment of years of missed pay. The Employment Appeal Tribunal has put limits on backdated claims, if there has been a break of more than three months between successive underpayments – this could mean employees can only make a claim if they have taken a holiday in the previous three months.

There is still the possibility of the companies involved appealing the decision. The cases could then be referred to the EU courts or Court of Appeal for clarification on how the European law should now be interpreted.

What should employers do?

Holiday pay must now reflect the worker’s actual normal earnings rather than just basic salary. If a worker’s earnings vary, the holiday pay should be based on an average of their actual earnings calculated over a 12-week period.

If you would like to know more about holiday pay please don’t hesitate to contact one of the team here at Tamar HR.