What should be included in holiday pay?
The question of which elements of pay, other than just salary or wages, should be included in holiday pay has been rumbling on for a good few years. The most recent case has confirmed what we have known for a while:
- Commission based on achievement of personal targets should be included in holiday pay.
- Overtime, which is obligatory but not guaranteed (ie the employee has to work the overtime if it is offered, but there is no obligation on the employer to offer any overtime) must be included in holiday pay.
But, there are a number of things we still don’t know:
- Should large, one-off bonuses be included?
- Should commission based on achievement of company targets be included?
- Where commission or overtime is to be included, how does the employer calculate how much to include?
- Does the employee have to bring a claim within three months of the commission/ overtime not being included in holiday pay, or is it a longer period? The sensible thing to do for an employee to do is to bring the claim within three months. It may be that in future employees will be able to go back further.
Commission and overtime only need to be included in the calculation of the four weeks European entitlement to paid holiday. The additional 1.6 weeks entitlement which comes from UK law does not need to include these elements. Whether in practice many employers draw the distinction is unclear.
Will Brexit make a difference? We do not think so, at least not for a long time. The UK is still a member of the EU and is therefore still subject to EU laws. Also, the Government has indicated that all European law will be imported into UK law whilst the government decides which EU laws to keep.