The Supreme Court has, in the long running case of British Airways v Williams & others, ruled that workers are entitled to be paid their 'normal remuneration' during the four week statutory annual leave period. Holiday pay must, therefore, include all elements of remuneration and not just basic pay. Only payments 'intended exclusively to cover occasional or ancillary costs' can be excluded. Although this case was pursued under the Civil Aviation (Working Time) Regulations 2004, it applies equally to workers from all industries.

In the case of Bamsey & Ors v Albon Engineering & Manufacturing Plc, the Court of Appeal said that when calculating workers' holiday pay, employers did not have to include overtime working, unless it was compulsory under the contract to be offered and worked. The ruling in Williams throws this decision into doubt. The pay a worker receives must correspond with his or her normal remuneration while working. If the pay received during the four week period of statutory holiday does not correspond with this, the employer will be in breach of the Working Time Directive and domestic legislation (Working Time Regulations 1998) must be interpreted to avoid this result.

Thousands of workers in the aviation sector have already lodged claims and the ruling of the Supreme Court will inevitably lead to challenges by workers in other sectors seeking to query the level of holiday pay they receive. We can expect myriad arguments to be raised about, for example, commission payments, bonuses and allowances being taken into account when calculating statutory holiday pay entitlement. Further, now the law in this area has been 'clarified', any failure to pay the correct amounts would be regarded as a continuing breach and can be backdated to 1998 or the worker's start date, if shorter. Some claims could, therefore, be very substantial!