Overtime and holiday pay
In the past companies have tended to base holiday pay payments on a worker’s basic pay, excluding overtime. In a recent landmark case an Employment Tribunal has ruled that past, non-guaranteed overtime should be included in the calculation of holiday pay.
Here’s what ACAS have to say:
“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 the contract to work overtime.
On 4th November 2014 the Employment Appeal Tribunal handed down judgment in the case of Bear Scotland v Fulton which covers how holiday pay should be calculated when non-guaranteed overtime is worked.
The judgement has clarified that:
- Workers should have their normal non-guaranteed overtime taken into account when they are being paid annual leave.
- Anybody making a claim must have had an underpayment for holiday pay that has taken place within three months of lodging an employment tribunal claim.
- If a claim involves a series of underpayments, any claims for the earlier underpayments will fail if there has been a break of more than three months between those underpayments.
- Only the 4 weeks’ annual leave entitlement under the original Working Time Directive apply to this judgment, rather than the full 5.6 weeks’ leave provided by the Regulations as they operate in Great Britain.
This judgement may have an impact in situations where non-guaranteed overtime is carried out by workers on a regular or consistent basis. It is unlikely to have an impact in situations where non-guaranteed overtime is either already factored into holiday pay, or possibly where non-guaranteed overtime is only used on genuinely one-off occasions.”