Latest Developments in Holiday Pay

The summer months have seen two binding decisions from the Employment Appeal Tribunal (EAT) in the continuing litigation around holiday pay.

In Dudley Metropolitan Borough Council v Willetts & Others [2017] UKEAT/0334/16/JOJ, the EAT held that regularly worked voluntary overtime (in addition to guaranteed and non-guaranteed overtime) should be taken into account when determining “normal” remuneration for the purposes of holiday pay. The EAT stated that whether remuneration was “normal” depended on whether it had been paid over a “sufficient period of time”, which was a question of fact and degree. Note that this case was an appeal to the Employment Tribunal decision reported on in May last year. Employers should take note and amend calculation methods for holiday pay as appropriate.

In Fulton & Others v Bear Scotland Ltd (No. 2) UKEATS/0010/16, the EAT confirmed that the “series of unlawful deductions” relevant for a claim for underpayment of holiday pay will be broken when a period of more than three months passes between the underpayments in question. This decision will give some comfort to employers that their exposure with regard to claims of this nature is limited by this three-month gap, in addition to the two-year-long stop period for holiday pay claims, which was introduced into U.K. legislation in 2015.