The Employment Appeal Tribunal has ruled that overtime should be taken into account when holiday pay is assessed, following a case taken by the union Unite.
What happens currently?
Workers in the UK are entitled to 28 days off a year for which they receive pay. Some employers take into account any compulsory or guaranteed overtime when working out holiday pay, others simply use a worker’s basic pay. For people who regularly work overtime this can mean that their earnings fall when they take time off.
What does the ruling mean?
Employers will have to include your earnings from overtime when working out how much holiday pay you are entitled to. The tribunal decided that article 7 of the Working Time Directive meant that in the cases it was looking at overtime was part of the workers’ “normal” earnings and as such should be included when their holiday pay was worked out. About 5 million workers are thought to do paid overtime and the ruling sets a precedent for their employers.
However, lawyers at Irwin Mitchell said it appeared that the rules would only apply to the 20 days holidays workers are entitled to under EU law, not the full 28 days they get under UK rules. Also, the judgment does not lay out how employers are supposed to assess normal pay – whether an average should be taken over 12 weeks or 12 months. This will fall to the government to decide.
So can I claim back pay I missed out on?
Unfortunately for workers, the bad news for employers was mitigated by the tribunal’s decision to limit back payments, so the ruling will not trigger an immediate payment of years of missed pay. The tribunal said that if there was a three month gap between deductions – holiday pay without overtime – it could only rule on the latest instance. It looks like that means employees can only make a claim if they have taken a holiday within the last three months. Richard Yeomans, employment partner at Addleshaw Goddard, said that the gap may “‘break the chain’ so that the employee cannot include the earlier holidays in a deduction from wages claim”.
However, he said employees could instead consider a breach of contract claim going back up to six years.
If you are a member of a union it might be able to help. The GMB union has asked its members who did not get the same pay during holiday as during the rest of the year to get in touch with it so that it can assess their claims.
Will I get some extra pay?
It’s unlikely that you will get anything soon. Lawyers say the decision is likely to be appealed, and while it is employers will sit tight.
What will employers do?
Some lawyers have warned that they might decide not to offer overtime in future. “In the longer term, the judgement could lead to employers dispensing with overtime and other types of allowances all together in a bid to limit future liability,” said Yeomans. “As many employers and employees rely on the availability of overtime work, this would have an adverse impact on both sides.”
