UK: Court of Appeal confirms new scope for holiday pay calculations

It has been determined that both non-guaranteed and voluntary overtime are in scope for inclusion in holiday pay calculations in respect of the 4 weeks’ Working Time Directive holiday entitlement, provided that the overtime is broadly regular and predictable. This follows The Court of Appeal judgment in the case of East of England Ambulance Service NHS Trust v Flowers.  There is no requirement that the overtime is compulsory under the contract of employment. Overtime payments which are exceptional and unforeseeable should not be included but those which are broadly regular need to be included in holiday pay calculation.

If you would like further guidance on the pay items that are required to be  included, please contact the Red House International team.

It should be noted that there will be further developments in relation to holiday pay.  In April 2020, for workers with variable remuneration, the Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 will increase the reference period for calculating an average week’s pay from 12 weeks to 52 weeks. Employers may have to review their holiday pay calculations again.

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