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Follow on Google News | The Minefield of Calculating Holiday Pay Just Got TougherLatimer Hinks Solicitors, one of Darlington and County Durham's longest established law firms, is warning employers to review their holiday pay structures following a significant ruling by the European Court of Justice (ECJ).
However, it also allows employees to make a claim in respect of the immediately preceding six years. So, using the above example, the value of the claim could be very substantial. Under the EU Working Time Directive, which is implemented in the UK through the Working Time Regulations 1998, workers have the right to 5.6 weeks of paid annual leave at the statutory rate of a week’s pay for each week of leave and, if that varies, it is calculated by working out the average over the previous 12 weeks. In the case of Lock v British Gas Trading Ltd, which was referred to the ECJ following an employment tribunal claim, it was ruled that a sales consultant at British Gas, whose salary was largely based on successful sales, would suffer a financial disadvantage in the form of less remuneration after a holiday. Nick Poole, Partner in the Commercial Department at Latimer Hinks Solicitors, said: “The calculation of holiday pay has become a minefield and it just got even tougher. A way of averaging commission over a previous period could be used, but it’s not just about how much should be paid during a holiday, it’s also about making sure that employees are not financially worse off in the period following." The ruling applies to the statutory minimum of 5.6 weeks’ annual leave to which all employees are entitled under the Working Time Regulations. Mr Poole added: "Employers may want to think about reviewing their employment documents as regards what commission will be allowed in any calculation of holiday pay. Now is the right time to get this structure updated and to be clear about how it has been affected by the ruling. There’s been talk of employees taking ‘strategic’ Within the next few months, the Employment Appeal Tribunal in the UK is expected to rule on three cases revolving around whether employers should include regular, but non-contractual, overtime in holiday pay calculations. For further information contact Nick Poole End
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