Holiday pay decision – greater clarity but little comfort for employers
23rd February, 2016
The long awaited decision of the Employment Appeal Tribunal (EAT) in British Gas -v- Lock was handed down on 22 February.
Unfortunately, for employers, the decision is largely what was expected.
What was the decision?
The EAT confirmed the earlier tribunal decision that commission should be included in the holiday pay calculation.
The EAT further went on to remove any remaining doubt as to whether overtime pay should be included in the overtime calculation.
What does this mean for employers?
For the first time for many years, we now have clarity as to what should be included in the holiday pay calculation.
However, this issue would be thrown into uncertainty again if British Gas lodges an appeal and it will be some time before we know for certain whether an appeal will be raised.
It is clear from this decision that the EAT considered that the correct place to raise the arguments in this case was the Court of Appeal and consequently an appeal may be a logical step.
But on the other hand, it is interesting to note that the Secretary of State for Business, Innovation and Skills supported the employees in the appeal.
On that basis, it is quite speculative, but we consider that that an appeal is a little unlikely.
Is this an end to the uncertainty?
Unfortunately, not quite.
Despite the greater certainty that the decision has brought, the whole issue of holiday pay still remains very complex and confused in that:
- An employee is only entitled to overtime and commission to be included in the holiday pay calculation for 4 weeks of holiday and not the 5.6 weeks of holiday provided by UK legislation.
- An employee (who did not make a Tribunal claim prior to July 2015) can only claim up to two years’ worth of unpaid holiday pay arrears.
- The holiday pay calculation should be based upon the average pay enjoyed by the employee during the 12 weeks prior to the week that the holiday is actually taken.
- It is unclear whether an annual or other bonuses should be included in the holiday pay calculation.
How can Ward Hadaway help?
The impact of this decision will vary greatly, depending on what overtime, commission and holiday arrangements individual employers operate.
For more information on how this could affect your organisation or on any other issue raised by this update, please get in touch.