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Holiday Pay Entitlement Decision

4th November, 2014

The Employment Appeal Tribunal has today, 4 November 2014, handed down its judgment in the case of Bear Scotland v Fulton (and conjoined cases).

This decision has been long awaited as it was expected to provide answers as to what really should be included in the calculation of holiday pay. The decision follows a series of cases in which it has been argued that holiday pay should not be limited to only basic salary.

The Employment Appeal Tribunal has now held that:

1. Holiday pay to which workers are entitled should include a sum to reflect normal non-guaranteed overtime, as opposed to basic salary alone.

2. The extension beyond basic salary in holiday pay applies only to the four week entitlement to leave under the EU Directive and not the additional statutory entitlement of 1.6 weeks leave pursuant to UK legislation.

3. Workers will be unable to bring unlawful deduction from wages claims for arrears in holiday pay if there has been a break for more than three months between underpayments. A break of more than three months effectively renders the claim time-barred.

4. Workers who are entitled to travel time payments (exceeding what is actually incurred in expenses) should also see a reflective sum in their holiday pay.

This is an interesting decision and provides some clarity for employers and employees alike. We will however keep an eye out for further updates to this case as leave to appeal to the Court of Appeal has been granted.

In response to this morning’s ruling Vince Cable, Business Secretary, has confirmed that he is setting up a taskforce to consider the impact of the ruling. Interestingly however, a tweet from the BIS Press Office (@Bispressoffice) stated that the taskforce was aimed at “limiting” the impact of the ruling.

The Aaron & Partners Employment Team have been advising a number of businesses and claims management companies on the holiday pay issue for some months and have undertaken detailed work ahead of today’s ruling.

Employment Partner Paul Bennett said: “In my view, the aim of the leave granted to the Court of Appeal is to try and limit the grounds of claims. If claims are brought on the back of this ruling then in the short term we expect Employment Tribunals to stay them, meaning they are placed on hold, pending the issue being heard before the Court of Appeal.”

Paul also commented: “There is widespread belief that thousands of claims have been stored up and that, like equal pay cases, the public sector could be the source of large scale claims from trade unions. The risk to private companies remains unclear, given the announced taskforce and its stated aims.

Fellow Employment Partner Claire Brook said “Employers need to assess their payroll and personnel records to determine the potential cost exposure in respect of possible claims and should budget for this additional cost moving forward.”
“Our Employment Team will be pleased to review current policies and practices to advise employers on the options available to them.”

Helen Watson, Head of Employment, said: “While this could be costly to your business, it is unlikely to have the impact we originally feared.”

For further information and advice in relation to holiday pay, please contact the employment team:

Head of Employment Helen Watson
01244 405565 [email protected]

Employment Partner Claire Brook
01244 405515 [email protected]

Employment Partner Paul Bennett
01743 453685 [email protected]

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