With Christmas just around the corner, employers need to consider how they will calculate holiday pay based on recent tribunal decisions.
The Bear Scotland vs Fulton decision confirms that a worker must receive their ‘normal pay’ during holiday periods which, for many workers, will not just be their basic rate of pay.
Previous cases also confirm that normal pay should include pay intrinsically linked to tasks that workers must perform and commission payments directly and intrinsically linked to employees’ work that are regular enough to be part of normal pay.
All the case law on this issue applies only to the four weeks’ minimum holiday provided under EU law, not to the UK’s extra 1.6 weeks’ holiday, or any extra contractual holiday.
Employees can claim for a series of unlawful deductions from their wages for any underpaid holiday within three months of the most recent deduction. In the recent Bear Scotland case, the Employment Appeals Tribunal (EAT) decided a gap of more than three months between holiday underpayments breaks the series. Although the EAT gave permission to appeal this point, the Unite union indicated it has no plans to do so. Of course, this may change and the point may be taken up by other claimants.
Employers correcting any underpayments from now on would, at least, break the ‘series’ for any deductions and stop the clock ticking for any historic claims.
The government has already announced that a task force has been set up to assess the impact of this decision. This is made up of employer and business organisations and it is clear the focus is on limiting the effect of the case.
Meanwhile, employers should:
- check contracts to ensure that breach of contract claims are not possible
- review pay structures, especially for overtime, commission, allowances and bonuses, to check the risk of claims
- analyse how often these kinds of payments are made and consider what is ‘normal’ for certain types of workers
- consider how they should calculate holiday pay over the Christmas period.
For any further advice, please contact Louise Addison on 01302 341 344.