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holiday pay includes overtime

4 November 2014

The Employment Appeal Tribunal has this morning held that holiday pay calculations should include a sum of money reflecting normal non-guaranteed overtime (work an employee, if requested, is obliged to perform but the employer is not obliged to offer). These calculations should be based on the four weeks’ leave as opposed to 5.6 weeks under the Working Time Regulations 1998 (WTR).

Elements of the appeal claimed that such holiday pay should be backdated potentially to 1998 (when the WTR came into force). However, claims for backdated pay claims are likely to be out of time if there has been a break of more than three months between successive underpayments. The potential financial implications for companies are still likely to be significant so an appeal to the Court of Appeal and beyond is likely to follow. The impact of the decision may well be that employers look to reduce overtime where possible.

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