One of the most eagerly anticipated developments in employment law in 2014 has been confirmation of how employers should calculate their employees’ holiday pay, namely whether payments such as commission, overtime and shift allowances should be taken into account.
Although the final position is still uncertain, the European Court of Justice has indicated that commission payments should be taken into account in calculations and the Employment Appeal Tribunal (‘EAT’) has confirmed that non-compulsory overtime should be included. That being so, employers now have to decide whether to change the way they pay holiday pay and, if so, how they are going to calculate sums due going forward. Even if employers decide to refrain from changing their practices now, it seems certain that the days of paying holidays at basic pay only are over.
One positive point to come out of the recent cases for employers is that, for the time being at least, the EAT has limited the scope for employees to claim backdated holiday pay in particular circumstances. However, as the cases progress through the legal system, employers should follow developments closely to ensure that all decisions, recommendations and risks are taken into account in the approach taken to calculations of holiday pay.
See other 2014 key developments in employment law - here