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The cost of holiday pay… the saga continues

A member of our employment team was looking forward to attending the appeal hearing in the case of Fulton v Bear Scotland Ltd at the Glasgow Employment Appeal Tribunal (EAT) yesterday (19th March). For those of you who have been keeping up to date with the developments in how holiday pay should be calculated, you will know that we are waiting in anticipation for the outcome of cases such as Neal v Freightliner and Fulton v Bear Scotland Ltd. These are due to be heard in the EAT and are expected to clarify recent debate on how employers should approach the calculation of holiday pay. Essentially, the issue is whether holiday pay should be based on basic pay only or should include all remuneration associated with employment such as overtime and commission?

Recent Employment Tribunal decisions in these cases set out that employers should comply with the overarching principle in the European Working Time Directive that holiday pay should include not only basic salary but also any other payments which are ‘intrinsically linked to the performance of employees’ tasks’, which would include commission and overtime. This is a potentially costly principle for employers who may now find themselves subject to claims from employees for unlawful deductions from wages and breach of contract. Employers now need to consider whether to calculate holiday pay based on this new guidance, including back pay for previous incorrect calculations, or to hold fire until the EAT issues its decision in the appeals in both cases.

We have now received confirmation that Fulton v Bear Scotland Ltd is to be conjoined with Neal v Freightliner and the appeals will be heard together before the EAT in London. Yesterday’s hearing in the Glasgow EAT was cancelled. A date for the EAT hearing in London in respect of the conjoined cases is awaited. We will report further once the cases are heard in the EAT. In the meantime, employers will be waiting nervously for these decisions.

If you would like to talk to a member of the DWF employment team about calculating holiday pay or any other employment issues please Get In Touch

For further information about holiday pay read our previous blog post

 

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further