Employment Law Newsflash – New Rules on Calculating Holiday Pay

Employer’s Sweat following New Law on Calculating Holiday Pay

If you are an employer who pays regular commissions, bonus or overtime pay, read on……

Following decisions in certain European Court of Justice Cases, employers must take a new approach to calculating holiday pay.  Employees are entitled to holiday pay whilst on holiday leave and for up to 4 weeks’ holiday per annum, they are entitled not only to basic pay during holiday leave but also in lieu of commissions, bonus, overtime payments – or at least the average of those paid to them over the previous 12 week or 12 month reference period.

For Example,

James is employed by an estate agent and in addition to his basic net monthly pay of £1750 he also receives commissions which average at about £1,000 net per month.  Up to now, when he has taken holiday leave, his employer has paid him pay in lieu of his basic pay and so for two week’s holiday he has been paid £807.69. Owing to the new case law, his employer will now be paying James pay in lieu of basic salary and commissions for the 2 weeks bringing his holiday pay up to £1,269.23.

What is your risk if you have only paid basic pay to your employees on holiday?

For current employees, they are entitled to claim back pay in lieu of commissions, bonuses and overtime that has not been paid to them over the years. It appears that employees are entitled to claim back to 1 October 1998 when the Working Time Regulations 1998 were first implemented.

For former employees, they have only 3 months from the termination of their employment with you to bring their claims.

How do we minimise the risk of employees bringing these claims? 

Contact holidaypay@hamlins.co.uk or phone our Employment Team on +44 (0)207 355 6096