Say one of your employees goes on annual leave. You know what to do. They take a week off—you pay them a week’s salary. After all, they have a holiday allowance to use. Easy, right?
A landmark ruling
On Monday 10th June, the Court of Appeal confirmed a landmark ruling that has determined how you must calculate holiday pay.
Do it right, and you’re in the clear. Do it wrong, and you could find yourself seriously out of pocket. Let us explain…
The court case
In 2017, a group of ambulance drivers brought proceedings against the NHS Trust. On top of their contracted hours, the ambulance drivers also worked voluntary overtime to meet the demands of the job.
But when the drivers took annual leave, the Trust only used their contracted hours to calculate their holiday pay. All that voluntary overtime?
It didn’t count. And so the ambulance drivers’ holiday pay didn’t reflect their typical week’s salary. So, what happened next?
Voluntary overtime counts
The dispute went to an employment tribunal and the ambulance drivers won. The judge ruled that employers should include all voluntary overtime in holiday pay calculations when it is “sufficiently regular and settled.” The Court of Appeal agreed.
There’s a chance that the Supreme Court could overturn this decision. But it’s unlikely—and would take a long time, too.
How to get it right
There are three important points you need to know about the Court of Appeal ruling:
- The court has declared that you should now factor voluntary overtime into employee holiday pay calculations.
- UK employees must get a minimum of 5.6 weeks of statutory holidays, but the new holiday pay rule applies to the first four weeks of annual leave only.
- There’s no current guidance on how to decide if an employee’s voluntary overtime is “sufficiently regular and settled.” It’s up to you to make the decision in each case.
Mistakes cost money
This new rule might sound like you’re going to have to pay out more money. But getting it right could actually save you money in the long-run.
Getting it wrong could put your business at real risk. If a disgruntled employee makes an employment tribunal claim, you could find yourself forced you to back-date holiday pay for as much as two years.
And if several employees make claims?
You could be shelling out a lot of your business’s hard-earned money.
Get expert advice 24/7
If this all sounds a bit confusing, don’t worry—we’re here to help.
Our employment law experts are on-hand 24/7 to answer all of your queries. They can tell you everything you need to know about getting holiday pay right. Call today on 0800 028 2420.