MH Employment

Tuesday 9 June 2015

Holiday Pay – Latest Developments

Under the Working Time Regulations 1998 (“Regulations”), workers are entitled to be paid during statutory annual leave at a rate of a week’s pay for each week of leave. Following two recent decisions of the European Court of Justice, the Employment Appeal Tribunal (“EAT”) has held that the UK’s rules on how a week’s pay is calculated do not provide workers with the holiday pay to which they should be entitled to under the European Working Time Directive (from which the Regulations are derived). The Directive requires workers to receive during any period of leave their “normal remuneration” or pay representative of the pay the worker would expect to receive if the worker was not on leave.

UK employers have generally paid holiday pay based on a worker’s basic pay, disregarding any bonuses, commission payments or overtime unless it is compulsory for the worker to perform the overtime and is paid regardless of whether the overtime is performed.