Important EAT Decision: Holiday Pay

Yesterday’s important EAT decision in the holiday case has prompted a lot of attention in the media and among our clients. We wanted to make sure that you know about the case if you have not heard already, and to suggest some points you might want to consider.

Here is a link to the EAT judgment: 

The judgement is 32 pages long and covers some complex issues. We can’t properly capture all the implications here. In our view the essence of the case is that holiday pay must represent “normal pay”, being “that which is normally received”. The EAT accepted that normal pay has to be paid “for a sufficient period of time to justify that label”. Not every fluctuation or variation in pay from month to month will count as “normal” pay. In the case the EAT was considering, the pattern of work was settled and included more hours than the contract stated was normal. The employer was basing holiday pay on the hours in the contract rather than the hours actually worked.

An important feature was that the extra hours were “non-guaranteed” overtime, in other words overtime that the employees were required to do if asked, but which they were not guaranteed to be offered. This leaves open the possibility that genuinely voluntary or ad-hoc overtime, or very limited occasional overtime, should not be viewed as “normal” for the purposes of holiday pay.

The EAT also confirmed that payments which are normally paid and are directly linked to work, such as travelling allowances which were taxed as remuneration, should also be included in the calculation of holiday pay.


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