Financial & Legal News

Overtime to count in holiday pay after Employment Appeal Tribunal decision

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Pearson’s Head of Employment, Susan Mayall, comments on this ground breaking ruling

“You have probably seen in the news that the Employment Appeal Tribunal (“EAT”) has today given its Judgment in Bear Scotland v Fulton – and other co-joined cases. Bear Scotland carries out road construction and maintenance of Scottish roads.

The law up to November 4th was that employees were entitled to receive holiday pay based on their basic wage, excluding non-guaranteed overtime. This appeal was about whether employees who worked for 44 hours per week (including 6 hours overtime) should have their holiday pay calculated to take into account their non-guaranteed overtime.

The EAT found that workers are entitled to be paid a sum of money to reflect non guaranteed overtime as part of their holiday leave payments, but this is only for the four weeks leave under European law and not the additional 1.6 weeks (8 days for employees working five days a week).
Importantly, the EAT held that claims for arrears of holiday pay will be out of time if there has been a break of more than three months between underpayments. This means that if employees who work non-guaranteed overtime took two weeks annual leave in June 2014 and received their basic pay rather than their basic plus overtime then they would be out of time to issue a claim for unlawful deductions from wages.   

The EAT gave permission to appeal to the Court of Appeal and noted that the time limitation point was the most significant.    In addition to this case being subject to further scrutiny by the Court of Appeal, Vince Cable has today announced that he is setting up a taskforce to assess the possible impact of this ruling and the financial exposure which employers may face.    

So we will have to wait and see what both the Courts and Parliament decide.  I will keep you updated!”

Businesses Affected by new Overtime/Holiday Pay ruling

Millions of workers nationally could now have their holiday pay recalculated to take into account overtime and commission, after the tribunal ruled that firms should re-evaluate how they calculate holiday pay.

From now firms should be more aware of taking into account commission and overtime when calculating holiday pay for certain workers. It is, however, unclear how employees will prove that the overtime they do is essential to their job. Business lobby groups including the Institute of Directors, the British Chamber of Commerce and the Federation of Small Businesses have all criticised the ruling, saying it will put a huge strain on businesses.

After the ruling, Business Secretary Vince Cable said he would be setting up a task force to assess the impact of the ruling.

"Government will review the judgment in detail as a matter of urgency," he said.  "To properly understand the financial exposure employers face, we have set up a task force of representatives from government and business to discuss how we can limit the impact on business."

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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.

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