Holiday Pay: Kim Hurley, Employment Solicitor, explains what’s included


One question we have been asked a lot recently is whether holiday pay should be calculated on the basis of basic pay only, or whether additional payments to the employee, such as commission and overtime, should be taken into account. This difference between the two ways of calculating holiday pay can impact heavily, both on an employee’s income and on the employer’s wage bill.

The answer is that the law in this area has become rather complicated, largely due to the effect of European law on the domestic law in England.

Let us consider overtime payments. If overtime is guaranteed – that is, the employer is obliged to provide overtime and the worker must work it – it must be included in the calculation of holiday pay. Where overtime is not guaranteed, but the worker has to do it if asked, it is only included for the purposes of the four weeks’ annual leave that workers are entitled to under the European Working Time Directive. It does not apply to the additional 1.6 weeks of annual leave that workers in England are entitled to each year.

The position with regard to voluntary overtime is less clear. This is where the employer asks the worker to work overtime, but the employee does not have to agree. There is, in fact, no clear guidance from the tribunals and courts on this. The cases that have come before the Employment Tribunal suggest that voluntary overtime may be included if it is regular enough to qualify as ‘normal.’

Employers who do not pay holiday pay at the correct rate can find themselves facing claims, potentially going back a number of years. The ability of workers to bring claims going back a long time has, to a certain extent, been limited by legislation. However, it is important for employers to get holiday pay right, so that they avoid the risk of claims, particularly when such claims can come from a united group of workers.

Given that this area of law is greatly affected by European law, we shall have to wait and see what the potential effect of Brexit will be on holiday pay. In the meantime, any workers or employers who are unsure of their rights should take proper advice.

If you would like further advice on this area of the law, please contact Kim Hurley on 01945 526612 or email kimhurley@fraserdawbarns.com

This article appeared in the November issue of the Discovering March magazine which can be read here.