The recent Employment Appeal Tribunal ruling on holiday pay and overtime has been overhyped by the media, with scaremongering suggesting that all voluntary overtime should be included in all holiday pay for any leave taken. This is not the case. Below sets out a few general questions on this ruling but for any specific advice please ring 0844 892 2772.
Q. What type of overtime does this apply to?
The ruling only applies to “normal non-guaranteed overtime”. This is where the employer is not obliged to offer the overtime but when offered the employee is obliged to take it and this occurs regularly enough to be seen as a normal pattern of work. A simple way of checking whether this is the type of overtime you offer is by asking; when overtime is offered and an employee refuses to work it do you consider it to be a rule break? Contractual overtime that which is contractually guaranteed by the employer, and the employee must do it, is not covered by the judgment but it has always been the case that this should be included in holiday pay. Voluntary overtime is also not covered, and it is not necessary to include this in holiday pay.
Q. Will I have to start paying more for future holidays?
If the overtime you offer is “normal non-guaranteed” then you may decide to pay this for future holiday in order to cancel out any risk of a claim. But, bear in mind, that the ruling restricts this to the first four weeks of holiday entitlement as required under EU law. Any holiday over four weeks should be paid at basic rate.
Q. Will I break the law if I don’t?
This ruling is by the Employment Appeal Tribunal which means that it has not changed the law. There is also a chance that the decision will be appealed so a final judgment could be many months away. Keeping pay practices the same until an appeal will not break the law but could risk tribunal claims.
Q. Will I have to pay out for past holidays taken?
Firstly, you need to check your employee’s holiday records. If any employees have taken holiday within the last three months and the holiday they have taken falls into the first 4 weeks of holiday they are entitled to the year, then they are within the time limit to bring a tribunal claim for an ‘unlawful deduction’. However, if it is more than 3 months since the end of their first 4 weeks of holiday, then they are out of time to make a claim.
The rules on back pay are complicated but if there is a gap of 3 months where no holidays have been taken, or no holidays which fall into the first 4 weeks of their entitlement have been taken, then back pay liability will be cut off.
If you receive one of these letters and need assistance, then please call our dedicated team of Payroll Advisors on 0844 892 2772 Option 3 and they will be able to assist you with any questions you have.