PCS advice on holiday pay claims

Following a landmark ruling on holiday pay the PCS legal team has put together advice for members and reps.

Earlier this month Unite union members won a groundbreaking employment appeal tribunal (EAT) which could mean all UK employers now need to include non-guaranteed compulsory overtime when calculating workers’ holiday pay, potentially increasing the holiday pay of 5 million workers.

If you’re contracted to work 20 hours a week, at the moment you’ll get 20 hours’ holiday pay for each week you’re on holiday – even if you regularly work 15 extra hours of overtime. Because of this ruling your employer could now have to pay you 35 hours’ weekly holiday pay to reflect the reality of your working hours, rather than what it says in your contract. It effectively means employees working lots of overtime aren’t penalised with a temporary pay cut for taking paid leave.

Where members are required to work overtime when offered and it is offered on a regular basis, then the judgement is likely to mean that the rate for holiday pay should be based on the normal take home pay for members, including their regular overtime payments. This is clearly intended, from the judgement, to apply to the core 20 days of leave under the European Working Time Directive (Article 7). 

Generally, if a worker receives the same pay every week or month then that is the pay that they should expect when on annual leave. Recent Court of Justice of the European Union (CJEU) rulings and the EAT decision mean that this might not always be the same as ‘basic pay’ – certain regular payments, such as shift allowances, commission and, in certain cases regular and required overtime, should also be included in the calculation of pay for annual leave periods. 

Depending on when the last payment of holiday pay omitting these elements was made, members may also be able to make a claim for back money - although the law has been tightened up in that respect.

The recent EAT judgement in Bear, Hertel and Amec v Fulton and others confirms, subject to any appeal, that employers need to consider carefully what is classed as ‘normal pay’ and that regular overtime and pay supplements such as shift allowances, bonus and commission should be included. 

Previously only basic pay counted when calculating holiday pay.

What it means for you

If you only work voluntary overtime on a sporadic basis, it is unlikely that this judgement would help you. Where you are required to work overtime when offered and it is offered on a regular basis, then the judgement is likely to mean that the rate for holiday pay should be based on the normal take home pay for members, including their regular overtime payments.  

Any future annual leave within the Article 7 entitlement (first 20 days of leave) and any further leave for which matching arrangements are agreed should be paid at this revised rate. 

Claiming for past holiday periods: the EAT judgement opens the door to historic claims for unlawful deduction from wages, under the Employment Rights Act. But because of the potential impact of the differential between the 20 statutory days and the remainder of any leave allowance, this is complex.

Reps should ask their employer to confirm if their employer includes these types of additional payments when calculating salary for annual leave periods, and if it does not, what will be done to rectify this. They should also ask their employer to detail how it has identified those staff whose pay will be affected by the judgements and how that has been included in holiday pay.

Any claim for an unlawful deduction has to be lodged with the ET within 3 months of the date on which the payment was received from which the deduction was made –that is usually the pay for the month in which the holiday 

was taken. However, it is possible to take a claim if it is lodged within 3 months of the last payment date, where there are a series of such deductions.

If you believe you may have a claim you should contact your PCS branch in the first instance.  

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