Holiday Pay and Overtime: Developments

Peninsula Team

January 09 2015

Late in 2014, the Employment Appeal Tribunal decided that, where workers do regular “non-guaranteed” overtime (overtime which the employer is not contractually obliged to give, but when it is offered, the worker may not turn it down), that this must be reflected in their holiday pay i.e. they should be paid more when they are holiday.

There have been a couple of developments in this area over recent weeks:

Appeal

Although parties were given leave to appeal the decision, it would appear that none of the determinations made in this case will now be appealed as the time limit for the appeal has now passed. This therefore would appear to remove the possibility that the decision to reflect overtime payments in holiday will be overturned.

Back Pay Liability

Because the effect of the decision could have potentially been very serious for employers in terms of how much compensation a worker could be entitled to if they took a claim to employment tribunal, the Government has also put in place measures to lessen the impact. A new law came into effect on 8th January 2015 which means that if a worker makes a holiday pay claim on or after 1st July 2015 in relation to overtime payments, they can only claim back pay for the period of 2 years counted back from the date they make the claim. There is no such limit on back pay liability for claims made before 1st July 2015.

Regardless of the limit, there are other rules which could limit back pay liability. Claims can only be made in relation to the first 4 weeks of holiday taken in a holiday year, and liability will be broken where there is a period of more than 3 months between these holidays.

If you need any clarification on this issue then contact the Peninsula Advice Service on 0844 892 2772.

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