In a landmark case, the Employment Appeal Tribunal ruled that it is wrong for employers to only take into account basic pay when calculating how much an employee should be paid while they are on holiday.
Following the ruling, workers can now make backdated claims, but only if it is less than three months since their last holiday, or last incorrect payment.
As reported by The Telegraph, the tribunal involved employees from three firms: industrial services company Hertel, engineering firm Amec and roads maintenance business Bear Scotland.
Under EU law, staff are entitled to four weeks’ holiday pay a year but there are no details on how it should be calculated.
Business Secretary Vince Cable said he has set up a taskforce to assess the implications. “We will review the judgment in detail as a matter of urgency to properly understand the financial exposure employers face.
“The group will convene shortly to discuss the judgment.”
The UK’s interpretation of the law, implemented in 1998, says holiday pay should be at the basic rate, and it is a grey area for those who work overtime or receive variable pay.
The Employment Appeal Tribunal ruled today that voluntary overtime and being on stand-by for emergency call-outs should be included when calculating holiday pay.
Around five million workers, a sixth of the total UK workforce, currently do overtime.
Business groups including the British Chambers of Commerce, the Institute of Directors and the Federation of Small Businesses have all criticised the ruling.
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