Holiday pay changes

POSTED: 20th October 2014
IN: Business news

In the UK, all workers are entitled to 4 weeks’ paid leave under the European Working Time Directive (WTD). Whilst the WTD grants every worker 4 weeks’ leave, it does not contain any definition within it of how pay for the 4 weeks should be calculated.

The way that pay is calculated has over time been progressively dealt with by the European Court of Justice. Its decisions have differed significantly from UK law. The Court has decided that workers on leave should enjoy the same economic conditions on leave as whilst at work and therefore variable elements of pay should be accounted for by employers. In practice this means that commission and voluntary time, which most employers do not currently include within their holiday pay calculations, are likely to be factored in the future.

Whilst much will depend on decisions currently before the UK Courts, most legal commentators are expecting that holiday pay will in the future become more expensive for employers. Under current UK law, workers who according to the new European calculation have been underpaid for their leave can claim back-pay from their employers, possibly as far back as 1998 or the start of their employment. Many employers are therefore urgently seeking legal advice on the impact these changes will have upon them and their options and planning for the changes.

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