By Rob Grinter, Mark David HR Ltd

The Employment Appeal Tribunal is considering a number of important cases concerning the calculation of an employee’s holiday pay which will have a major impact on UK employers.

In Bear Scotland Ltd v Fulton and another, Hertel (UK) Ltd v Wood and others and Amec Group Ltd v Law and others, the employment tribunals upheld the claims of the applicants that regular non contractual overtime should have been included in their holiday pay. The employers appealed these decisions arguing that non-contractual overtime does not have to be included in holiday pay under the Employment Rights Act 1996.

Many UK employers do not include overtime in holiday pay and if the EAT finds in favour of the applicants they could face significant costs and potential claims for unlawful deductions from wages going back many years. In a recent case Elms V Balfour Beatty Utilities Solutions Ltd the tribunal found that a workers holiday pay should be based on basic pay excluding overtime.

The EAT decision is therefore very important for employers and the Secretary of State for Business Innovation and Skills has intervened to question whether the EAT can interpret the Working Time Regulations to give effect to European Court judgements or whether parliament needs to change the regulations.

The decision will be far reaching and will affect many UK employers.