Holiday Pay – does it include Overtime? 1

Payroll

Back in November 2014, the BBC reported..

Workers have won a ground-breaking case at the Employment Appeal Tribunal to include overtime in holiday pay.

This means some people working overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay.

Since then we have had further legislation, the Deduction from Wages (Limitation) Regulations 2014 (the Regulations), which impose the 2 year limit on any new holiday pay claims raised from 1st July 2015 onwards. Separately, a recent case from the Northern Ireland Court of Appeal (Patterson v Castlereagh Borough Council) suggests that voluntary overtime may – in some circumstances – have to be included in holiday pay calculations.

The Northern Ireland Court of Appeal has just held that there is no reason why voluntary overtime cannot be part of an individual’s normal working week and therefore could be included in holiday pay calculations.

This will be bad news for many employers and in Scotland there are now 21,000 holiday pay claims in the Scottish Tribunal system alone. [Law-Now]

Whilst I am sure may employees will welcome the decision, this will surely lead employers to reconsider whether using contractors would be cheaper? No Holiday Pay, No Auto Enrolment Pension, No Redundancy or Statutory Pay

Many already predict that by 2020 50% of workers will be self employed!

steve@bicknells.net

Have you accrued for Holiday Pay correctly? Section 28 FRS102 Reply

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Most larger businesses, especially if they are audited probably already accrue for Holiday Pay but not every business has been accruing the cost. FRS102 Section 28.1 will require that holiday pay is accrued. Here is an example from the FRC.
Holiday Pay

Holiday pay isn’t always easy to calculate for example if you have part time employees or casual workers, Gov.uk have a calculator to help work out the entitlement – GOV.UK Holiday Calculator

The next issue is the rate of pay, for some employees with regular hours its easy but for those with fluctuating rates, bonuses etc a 12 week average is used as explained by ACAS

On 4 November, the Employment Appeal Tribunal (EAT) ruled that holiday pay should reflect non-guaranteed overtime. Non-guaranteed overtime is where there is no obligation by the employer to offer overtime but if they do then the worker is obliged by their contract to work that overtime.

The Government set up a taskforce to consider the possible impact of the EAT’s ruling on holiday pay. Regulations were laid out on 18th December 2014 to limit claims for unlawful deductions from wages to two years. The rules apply to Employment Tribunal claims made on or after 1 July 2015.

Further details at ACAS Calculating Holiday Pay

steve@bicknells.net