Over the past year, the issue of holiday pay and how it should be calculated has become a hot topic for employers with a number of key cases being decided. There is still a great deal of uncertainty in this area but the key development has been the move towards "normal remuneration", which must be paid to employees taking holiday, having to include all payments intrinsically linked to the performance of contractual tasks. What this has meant in practice is that holiday pay should now include, in most circumstances, regular overtime that employees are required to work and commission, together with a number of payments that will be familiar to employers in the transport and logistics sector, such as shift and local allowances and call-out and standby payments.
So where does this leave employers looking backwards and forwards?
Looking backwards, employers are facing potential large liability for past underpayments of holiday pay that did not include the above elements. The government has legislated so that claims made from 1 July 2015 can only seek up to 2 years of back payments. However, claims brought before that date could potentially go back to 1998 when the Working Time Regulations came into force (although there are arguments available currently that a gap between any holidays of between 3 months or more prevents an employee claiming any earlier than that gap). Many employer are engaging with the Unions to deal with past issues and also to negotiate on the approach to take going forwards. This will involve choices over what elements of remuneration to include in holiday pay, in particular in relation to voluntary or irregular overtime, and what "reference period" to use to calculate the pay.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
