How will the holiday pay ruling affect you?

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Workers in the UK have won a landmark case at the Employment Appeal Tribunal which will see regular overtime included in holiday pay.

This means that those who are required to work overtime as a regular part of their job will have these earnings taken into account when holiday pay is calculated.

The ruling is seen as a monumental step forward for employees currently working non-guaranteed overtime.

But how will this ruling affect you? And what does it mean for employers and employees?

What happens currently?

Under UK law, workers have only been entitled to basic pay during their holiday periods.

Whilst some employers will consider non-guaranteed overtime when working out holiday pay, most will simply refer to a worker’s basic pay.

Those who are working regular overtime often see a considerable reduction in earnings when they take time off as any additional payments for regular overtime are not included.

How will the ruling change this?

Employers will now have to include your earnings from regular overtime when working out how much holiday pay you will be entitled to.

The Employment Appeal Tribunal ruled on three test cases. These were brought against the engineering company Amec, industrial services firm Hertel, and maintenance company Bear Scotland.

In these cases, it was ruled that the overtime was part of the employees’ normal earnings. As a result, those earnings should be taken into account when calculating holiday pay.

However, it is important to note that whilst UK workers are entitled to up to 5.6 weeks holiday per holiday year, the ruling only applies to the 4 weeks holiday allowed under EU law.

Simply, this means whilst workers are entitled to receive average pay (taking overtime worked into account) for 4 weeks of holiday, basic pay will continue to be applied for the remaining 1.6 weeks.

How many people will this affect?

It is currently estimated that 5 million UK workers currently work non-guaranteed overtime. However this is not necessarily thought to be an accurate figure of the number of people who have worked regular overtime.

Can I make a claim for back payment?

Despite ruling in favour of employees, the tribunal has sought to limit the amount of backdated claims. Employees can only make a claim for back pay on a holiday taken within the last three months.

Unions are already asking for those who are not receiving the same pay during their holidays as the rest of the year to contact them.

If you currently work non-guaranteed overtime but are not part of a union, you can contact a solicitor for advice on whether you may be entitled to receive back pay.

What does this mean for employers?

Manufacturers’ organisation EEF has claimed that 90% of its members expect payroll costs to ‘spiralâ? as a result of the ruling. They added that firms will have little option but to factor the additional costs into pay negotiations and to reduce overtime.

Many employers will now need to decide how they will handle existing claims as unions seek to file claims for underpaid holiday pay.

Contact Farnworth Rose for expert advice

Whether you are an employee and believe you may be entitled to backdated holiday pay, or an employer who is unsure as to how the new ruling affects your business, you can contact Farnworth Rose.

Call us today on 01282 695 400 to receive expert advice from our specialist Employment Law Solicitor.