Calculating holiday pay (updated 2017)

When calculating holiday pay Employers must now include payments for regular overtime and contractual results-based commission.

Updated to look at October 2016’s Court of Appeal decision in Lock vs British Gas and we also look at October’s 2014 Employment Appeal Tribunal (EAT) decision that says overtime should be included when calculating holiday pay (the combined cases of Bear Scotland vs Fulton, Hertel vs Wood and Others, and Amec vs Law).

And details of the EAT’s confirmation in White v Dudley Council in August 2017 that voluntary overtime, voluntary standby and voluntary on-call allowances that are ‘normal’ remuneration and paid over a sufficient period of time, and on a regular basis, should be included in holiday pay calculations too.

Calculating the amount of pay an employee should receive when on holiday used to be fairly straightforward, with the exception of the interaction between holiday and sick pay. However, recent decisions have made the calculation a lot more complicated. We look at all the details here and what this means for Employers and Employees (and Workers).

And, in addition, information from April 2020 here

Calculating Holiday Pay – Currently the ‘reference’ period in the Working Time Regulations (1998) that is used to calculate holiday pay is 12 weeks.

So, where a worker does not have regular or normal working hours, holiday pay should be calculated based on average weekly pay in the 12 weeks before the holiday date (or if the worker did not work in the previous 12 weeks, then the last 12 weeks they worked/earned).

However, on 6th April 2020 the reference period in the WTR for calculating annual leave increases from 12 to 52 weeks.

This means that if a worker has been employed by their employer for at least 52 weeks, the holiday reference period is extended from 12 weeks to 52 weeks.  However, if the worker has been employed for less than 52 weeks, their holiday pay is based on the number of complete weeks they have worked.

holiday pay

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