Holiday Pay

The Question

The rules for holiday pay entitlement had previously been relatively straightforward allowing both employees and employers to clearly know their respective positions. However, in late 2014, the Employment Appeals Tribunal was faced with the complex question of whether an employee’s non-guaranteed compulsory overtime contributed to their holiday pay entitlement.

The Decision

The Tribunal decided that it does. Where the employer is not required to provide overtime but the employee is nevertheless required to accept it if offered, the overtime will contribute to that employee’s holiday pay entitlement. This decision mirrors the positon with guaranteed overtime which was determined back in 2004 but the situation with purely voluntary overtime is still unclear having not been directly dealt with in the decision.

The Impact

Following the decision many employers may be concerned with the prospect of facing a backlog of claims. However, such concerns can be eased as the Tribunal has placed significant limits on retrospective claims. There is a general 3 month limit on claims brought in the Employment Tribunal and, where there is a series of deductions, any deduction that is over 3 months older than the most recent deduction will be time barred. Due to the sporadic ways in which holiday is usually taken by employees, this is likely to significantly limit any possible claims.

The Options

As permission has been granted for the matter to be sent to the Court of Appeal the main decision for an employer is whether to follow the Tribunal decision or gamble that the Court of Appeal will take a different view when it considers the issue itself.

For more information on this holiday pay change, please click here.

If you have any questions about holiday pay or any other employment issue, please give us a call on 0116 289 7000 and ask to speak to Amanda Badley, our Head of Employment.