There have been a number of recent court decisions surrounding entitlement to holiday pay says Jonathan Wilson of Barnett & Turner. Specifically they have been considering whether overtime, commission and work-related travel should be factored into holiday pay calculations. A court judgement 18 months ago found that contractual (but not voluntary) overtime must be included in holiday pay calculations. This decision was followed earlier this year by another which confirmed that a worker who received performance related commission was entitled to have this taken into account when his holiday pay was calculated.
It sounds straightforward enough, but unfortunately the court did not explain how the holiday pay should be calculated to take account of lost commission. As the ACAS website currently states: “There was no definitive legal answer about how such holiday pay calculations must be made, or how/if such claims can be backdated. ACAS continues to monitor the case and will provide further updates when they are available.”
While the legal obligation on employers is therefore clear – that commission and contractual overtime must be included in holiday pay calculations – it is still unclear as to how some of this should be calculated and whether employees will be able to make backdated claims. The case may also be subject to further appeal.
Our expectation is that the maximum period for backdating a claim will be two years, based on recent legislation from July 2015, which limited unlawful deduction of wages claims to a two-year period. This law prevents an employment tribunal considering deductions which were made more than two years before the unlawful deduction claim was brought.
A useful summary of the rules can be found here: http://www.acas.org.uk/index.aspx?articleid=4109
Given this is an area which is still going to require further clarification, we would recommend that you talk to an employment lawyer if you are seeking advice.
If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk