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Holiday pay – the next employment battleground?

Since the European Court of Justice issued its decision in Lock v British Gas, the issue of underpayment of holiday pay has been vexing employers up and down the country.

What exactly is the issue?

The Working Time Directive gives employees the right to holiday pay, but does not explain how it should be calculated. The ECJ has said that contractual sums that are inherently linked to performance of the individual – i.e. calculated and earned according to whether and how much work is done – should be included in the calculation. In Lock this meant that commission payments were to be taken into account. It may also mean that other payments such as overtime, some types of bonus and shift allowances may have to be included.

Not all employers currently calculate holiday pay in this way. Billed as the “next equal pay”, mass litigation is looming with unions and employees lodging grievances and gearing up to raise Employment Tribunal claims.

What can we do to help?

We have put together a kit to help employers assess their potential liability for underpaid holiday pay. We are already assisting clients to take pre-emptive action before their own employees raise the point (which, almost inevitably, they will do) and advising clients who are facing claims and grievances, making use of our case management system to handle volume litigation. Please get in touch to discuss how we can help you.

Also, the first of our Autumn seminars is on holiday pay. The session will explain where we are, what is likely to happen and, most importantly, what practical steps can be taken now. Please follow this link to book your place.

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