Holiday Pay Update
During annual leave, employees must be paid “normal remuneration” What constitutes normal remuneration has been subject to a number of cases in the Employment Tribunal.
The latest case law setting out what pay employees should receive during annual leave has confirmed that normal remuneration includes voluntary overtime that is worked regularly and is part of the employees’ normal pay.
Up until recently, there had been no formal decision on overtime that didn’t have to be offered or worked by either the employer or the employee respectively. Tribunals had held that compulsory and guaranteed overtime had to be included (as well as results based commission) The Employment Appeal Tribunal has now held that where overtime is offered and worked on a regular basis, whether voluntary or not, it has been included in holiday pay calculations.
The purpose of the law and these decisions is to ensure employees are not discouraged from taking annual leave because their pay will be greatly reduced. It is therefore vital that all employers ensure that where overtime is a regular part of an employees’ working week, that this is taken into account when calculating that employees holiday pay.
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