Tribunal finding paves the way for higher holiday pay

| 5th November 2014

The Employment Appeal Tribunal has ruled that overtime should be included in calculating the holiday pay employees are entitled to.

Up until now, the UK interpretation of the EU Working-time directive had meant that holiday pay was calculated based on the basic hours worked, effectively the hours stipulated by the employment contract.

Some companies circumvented this rule, by stating mandatory overtime in their contracts, which were not included.

However, with increasing numbers of people working voluntary or compulsory overtime (The ONS puts the figure at 16.2% of the working population), these hours will now be taken into account.

Business groups have argued that the significant financial implications may lead to business closures, particularly in the SME sector, despite the Tribunal ruling that backdated claims are to be limited to three months prior.

The decision is expected to be appealed, given the substantial sums involved.