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The UK Employment Appeal Tribunal (EAT ) has made a significant ruling   that ‘non-guaranteed overtime’ can fall within the definition of “normal pay” set out in the EU Working Time Directive and therefore should be included in the calculation of a worker’s holiday pay.Holiday pay now needs to include pay for non-guaranteed overtime which was worked by the employee in the 12-week period before the holiday.

Non-guaranteed overtime is overtime that the employee is contractually required to work, but which the employer doesn’t promise to offer. This type of overtime is separate and distinct from voluntary overtime which was not the subject of the case before the EAT.

Previously, employers have been paying holiday pay based on an employee’s basic pay but now employers will have to take into account certain types of overtime, and potentially bonus payments and commission, when calculating holiday pay, rather than just considering basic pay.

This may now result in numerous claims by employees seeking back dated holiday pay, which could have serious impact on small businesses.

Vince Cable, the Business Secretary has set up a task force to look at the impact on businesses, however, leave has been given for the decision to be appealed to the Court of Appeal, so a final decision could still be a long time coming. Watch this space ……..

For all aspects of Employment Law Advice contact Julie Leonard.
 

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