The answer should become clearer after 31 July this year when the EAT delivers its decision in the cases ofNeal v Freightliner Limited and Bear Scotland Limited v Fulton.
It has recently been announced that both of these cases will be heard together on 30 and 31 July. Both cases deal with the question of whether overtime, which is non-contractual and not guaranteed, must be taken into account when calculating a worker’s entitlement to holiday pay under the Working Time Regulations. This issue has come under increased scrutiny following the Supreme Court decision of British Airways plc and Williams which held that employers have to count certain additional payments on top of base pay when calculating holiday pay.
The outcome of these cases could have very broad repercussions for employers, as many employers do not currently "count" overtime when calculating holiday pay. If the EAT decides that discretionary overtime should be taken into account in some cases, employers could be hit with claims from employees which could add up to a significant amount. Provided that employees can show a series of deductions, they could potentially claim back pay for years. Due to the significance of these cases and the issues involved, BIS have been granted leave to intervene in the proceedings.
Employers should review how they currently calculate holiday pay to identify areas of risk. MacRoberts can help with this. Details of our fixed price Holiday Pay Audits can be found here. We can help you assess the level of risk and give you options for managing that risk.