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Breaking News: EAT Decides Overtime Should Be Included When Calculating Holiday Pay

Breaking News: EAT Decides Overtime Should Be Included When Calculating Holiday Pay

The EAT's much anticipated holiday pay decision is out, and can be distilled into three key points.

First, the headline news: in principle, non-guaranteed overtime should be included when calculating holiday pay.

Second, the UK legislation (the Working Time Regulations 1998) can be read so as to be compatible with the European Working Time Directive. If upheld in any inevitable appeal, this finding would lay the cost of any claims for underpayment of holiday pay at the door of employers rather than the Government.

Third, in terms of the reach of any backpay claims, the EAT highlighted that employees in the UK have two types of annual leave: their 4 weeks of “European” annual leave and the extra 1.6 weeks’ leave given by the UK Government. The EAT’s view is that if there is three months (or more) between workers taking the last of their “European” leave in one holiday year and the first of their “European” leave in their next holiday year, this gap will create a break in the “series of deductions”. This break would in effect be a barrier to earlier (pre-break) holidays being included in a backpay claim and may give employers some comfort that the span of claims could be significantly limited.

Clearly this decision has implications for many employers, and once we have reviewed and considered the judgment in more detail we will be issuing a comprehensive briefing note to give you guidance on where things now stand and what (if anything) you should be doing.

It’s worth noting that it is very likely that this decision will be appealed (on both sides), so this is by far the end of the road in terms of holiday pay case law.

If you have any questions or wish to speak to a member of the team about how this decision might affect your organisation, please contact us.

Jennifer Skeoch