6 November 2014 by


Landmark decision

It has been a long standing debate, should overtime be included in calculating the rate of holiday pay?

The speculation can now end as the Employment Appeal tribunal confirmed today that overtime must be include in holiday pay. This paves the way for a wave of claims from people who have worked voluntary paid overtime for additional holiday pay. The law prior to this ruling was that only basic pay had to be used to calculate holiday pay entitlement.


The tribunal ruled on three cases, road maintenance company Bear Scotland v Fulton, engineering firm Amec v Law and industrial services group Hertel v Wood that overtime should be taken into consideration when calculating holiday pay. The employees had won their original claims in the Employment Tribunal which were appealed by the employers. In what could be a landmark ruling, the employment appeal tribunal has rejected the companies’ appeals.

Backdated or not?

The tribunal is said to have confirmed that for a three month period the claims could take into account backdated pay as well. There is also the potential of the ruling being appealed which could further change the landscape, but this could take in excess of a year.

The government estimates that one-sixth of the working population are entitled to be paid overtime, meaning all of these could be entitled to more holiday pay.

One for the workers

The coalition and business groups had argued strongly that overtime should not be included in holiday pay calculations, especially since the blow to businesses earlier this year following a ruling that commission payments should be included in calculating holiday pay.

The ruling has widespread implications for companies where staff are required to do overtime as a regular part of their job but have nominal basic working hours.

Business Secretary Vince Cable has confirmed that to better understand the financial exposure employers face, a task force of representatives from government and business has been set up to discuss how the impact on business can be managed and limited.

For advice on holiday pay entitlement or any employment related issues please contact one of our solicitors in the Employment team here.

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