05 November, 2014
The Employment Appeal Tribunal decision in the case of Fulton v Bear Scotland and associated cases has been handed down this week. This held that the calculation for the amount holiday pay must include non guaranteed overtime. Under current legislation, only basic pay counts when calculating holiday pay.
This follows the other recent European decisions which confirmed that commission and other enhancements should also be included in the holiday pay calculation.
These cases are all as a result of the European Working Time Directive is which is in place to protect workers health and safety. A crucial part of that is of course that workers need to have holidays. The purpose of providing payment for annual leave is to put the worker in the same position as he would be if he had not taken the leave. It has been made very clear by these cases that little must discourage or prevent a worker from taking that holiday.
What is the risk?
This decision has retrospective effect. This means that employees and workers can potentially claim for the shortfall in historical holiday pay back to 1998, when the Working Time Regulations were introduced. There is some light as the EAT did state that where there was a gap of more than 3 months between previous 'underpayments' then this will break the chain of underpayments meaning the worker may lose the right to bring the claim beyond that point.
What to do now?
Take action immediately. Whilst this case will likely be subject to an appeal, as there is a 3 month cut off period for making a claim in the Employment Tribunal, if payments are corrected now this may limit or even avoid the scope of claims.
It is difficult to know how to calculate the correct amount of holiday pay as no guidance has yet been given. One solution could be to work out a 13 week average of pay including overtime and commission prior to the leave and pay on this basis.