Previously variable payments such as non contractual overtime, out of hours payments and bonus payments were not included in holiday pay for those with normal contractual hours. However following decisions made at the European Court of Justice and the Supreme Court in the case of BA v Williams the courts have ruled that holiday pay should be paid at a workers normal remuneration.
A recent employment tribunal has ruled that non contractual overtime should be included in the calculation for holiday pay. This will only apply to the minimum four weeks (20 days for five-day working) set out in the European legislation and the 1998 Working Time Regulations. The rule could be extended to the full 5.6 weeks ( 28 days for five-day working) in the near future.
Steve Murphy, general secretary of the construction union Ucatt, welcomed the development. He said: “Holiday pay should represent a worker’s normal pay. Employers must do the right thing and make sure that workers get the holiday pay they are entitled too.”
He added that a shortfall of holiday pay can be claimed as an unlawful deduction from earnings. Any shortfall of holiday pay over a continuous period can be regarded as a continuous period of unlawful deduction and could date back years rather than just three months under the Working Time Regulations.
However if an employer starts correctly paying holiday pay or if an employee leaves that employment, they then only have three months minus a day in which to lodge a claim for unfair deduction of earnings.