Do your staff do overtime? Recent tribunal rulings suggest that in the near future it will be required for holiday pay to be calculated based on actual hours worked not just on contracted or “basic” hours. This would then most likely be calculated on average hours worked over the previous 12 weeks.

An appeal of this tribunal case is yet to be heard but if the decision is upheld, this could have… a significant impact on employers’ holiday pay budgets. In addition it will add an administrative burden in calculating holiday pay.

And just to really make it complicated this ruling only applies to the 4 weeks’ holiday pay employees are entitled to under EU law not the additional 1.6 weeks that is given under UK law!

Some legal advisors are however suggesting that it is advisable for employers to start paying holiday pay taking overtime into account with immediate effect before the appeal decision is in.

This is because if the decision is upheld and the requirement to calculate holiday pay this way becomes a statutory right, it is possible that employers who are not yet doing so may face lengthy back dated claims for holiday pay. Employers who have made the switch early enough may avoid back dated claims as employees can usually only bring a tribunal claim within three months of the statutory right being breached.

It’s complicated & if you think you are affected we suggest you seek advice – give us a call!