The Employment Appeal Tribunal has today [4/11/14] handed down a decision that could have significant repercussions for your business and the amount that your workers receive as holiday pay.

Previously, it has long been understood that workers were entitled to their basic pay during any holiday leave. Today’s ruling has changed that.

The key points are:

1. Workers are entitled to receive their “normal remuneration”. This means their typical average pay, not just their basic pay, and so will include their normal non-guaranteed overtime and travel time payments (in excess of expenses incurred).

2. This only applies to the minimum leave to which they are entitled under the European Working Time Directive, that is, the first 4 weeks holiday for full-time employees (not the 5.6 weeks they are entitled to under the UK’s Working Time Regulations).

3. There is a risk that employees could claim for arrears of holiday pay but, in normal cases, such claims would be out of time if there has been a break of more than 3 months between underpayments.

Vince Cable has announced that the Government is going to set up a task force to assess the impact of today’s ruling.

Interestingly, the members of the task force that are named in the press release include government departments and employer organisations but no trade unions or other employee organisations. The stated aim of the task force is to “discuss how we can limit the impact on business”.

Alison Gair, Head of Employment

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