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Holiday pay

24 November 2014

The latest extension to, or at least clarification of, the definition of holiday pay for the purposes of the UK Working Time Regulations is to be found this month in the widely reported decision of the Employment Appeal Tribunal in Bear Scotland Ltd –v- Fulton and Baxter.

Holiday pay should reflect, and indeed equate to, a worker’s “normal pay”. That is partly a question of the regularity with which certain types of payment are normally made and the extent to which parts of their normal pay are “intrinsically linked” to the work they are required to carry out under their contract of employment. Thus it was already established that ‘time away pay’ for pilots was “normal pay” (Williams –v- British Airways) and commission payments that were regularly received as part of normal pay should be included when calculating holiday pay (Lock –v- British Gas). This latest case establishes that overtime payments for overtime that a worker is not allowed to refuse (whether guaranteed or non- guaranteed overtime) constitutes part of a worker’s “normal pay” when calculating the holiday pay they are entitled to.

That much of the decision was favourable to employees and workers. However, employers can draw comfort from the fact that the EAT decided that claims for back payment of such unpaid holiday pay are limited to 3 months where workers’ previous periods of holiday are separated by a gap of more than 3 months, which is likely to be the case in the large majority of cases. Furthermore, this extended entitlement only applies to the EU minimum of 20 days paid holiday and not the additional gold plated 1.6 weeks that UK workers enjoy.

David Ludlow