Holiday Pay – is it such a big deal?

There has been lots in the press about the Employment Appeal Tribunal (EAT) decision on holiday pay.  The EAT decided that non-guaranteed overtime which the employee is contractually bound to perform if asked must be taken into account.

This is not a great surprise.  It is in accordance with the intention of the original EC Directive that the workers should not suffer any detriment by taking holiday.  Indeed the conclusion of the EAT can be reduced to the very simple proposition – “‘Normal pay’ is that which is normally received.”

This also applies to taxable travel time payments in excess of the actual expenses incurred.  Guaranteed overtime was already to be included.  Overtime which the worker requests but is not contractually obliged to do will not.

This only matters for holiday pay calculated for the 4 weeks holiday which is covered by the Working Time regulations.  The additional 1.6 weeks holiday which makes up the statutory holiday in Britain, or any additional contractual holiday are not covered.

On a procedural point the EAT decided that as claims to the Employment tribunal will be for “unlawful deduction from wages” a claim can only be brought if the employee has taken holiday within the last 3 months, and then only for previous holidays if there has not been a break of more than three months between them.  This limits the extent of claims via the ET.

It is highly unlikely that the EAT’s decision will be the last word on this issue.  Leave to Appeal to the Court of Appeal has been given, and after that there is still the Supreme Court.  The government intervened and sent a QC to argue against the propositions accepted by the EAT.  BIS has already set up a Task Force, containing only employers organisations, to “assess the possible impact”, though a tweet from BIS put the purpose rather differently – “limiting the impact”.

This one will run and run. Expect lots of anti EU rhetoric, and possibly unsolicited calls from claims companies.  If you are an employee who may have lost a substantial amount you should get advice and start a claim within 3 months of your last deduction, but expect that to be stayed until there is a final decision on this case, which could be another year.  If you are employer you may want to calculate the potential value of claims and make provision for them.  Employers may also want to review their contracts to see if they can be changed.

For advice on Employment Law contact:

Neil Howlett

Andy Hambleton