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August 2014

Holiday pay law

The CBI are warning that employers are facing the risk of significant additional costs, potentially ‘billions of pounds’, from employment tribunals challenging the normal calculation of holiday pay under the Working Time Regulations (WTR).

In the UK holiday pay is currently calculated on the basis of a ‘week’s pay’ which is based on basic salary and excludes payments such as working allowances, expenses, overtime, commission and bonus payments as these payments relate to specific work done by an employee whilst performing their duties of employment.

A recent European Court of Justice (ECJ) judgment redefined holiday pay to include an allowance for commission, even though commission is paid on sales made and the employee would not have delivered those sales whilst on holiday.

If liabilities on holiday pay are backdated then employers may face huge liabilities for holiday pay arrears.