The Employment Appeal Tribunal has ruled in Bear Scotland and Others v Fulton and Others that "non-guaranteed overtime" (overtime which the employer is not obliged to offer, but which employees are obliged to work if the employer chooses to offer it) together with certain travel allowances, should be included for the purpose of calculating the 4 weeks' statutory holiday pay required under the Working Time Directive. The EAT decision follows several recent cases involving the highly technical issue of how holiday pay should be calculated (including some heard by the Court of Justice of the European Union).

Further detail on the recent cases is contained in our Employment Department's Update, which can be accessed by clicking here.

The cases also raise a number of questions in relation to pensions, including:

  • whether there will be any change to the pay which must be taken into account for assessment and contribution purposes under the automatic enrolment legislation (specifically, whether the decision affects the elements of pay which fall within "qualifying earnings" and "basic pay"); and/or
  • whether there will be any change to the level of pay by reference to which contributions and benefits are calculated under a scheme's trust deed and rules (this will largely depend on how pensionable pay (or equivalent) is defined).

Leave to appeal to the Court of Appeal has been given. The timing of any appeal is uncertain and so the matter will remain unresolved for some time. In the meantime, employers with relevant elements of pay in their remuneration structure may consider it prudent to conduct an audit of their payroll and pensions and seek advice in order to assess and, where appropriate limit their legal and financial exposure.