Holiday pay: Who is affected – and how much could you be paid?

Millions of workers could claim for additional holiday pay after a landmark ruling today

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Staff who regularly clock up overtime could now be able to claim additional pay for annual vacation leave.

The decision by the Employment Appeal Tribunal overturns established practice in which only basic pay was counted when calculating holiday pay for workers.

Some estimates have suggested as many as 5m people will benefit from the ruling, although the Unite union, which brought the cases, believes the number is likely to be far smaller, as the ruling very specifically concerns employees whose contracts stipulate they must do overtime. Voluntary overtime is not technically included.

Amid much fog and spin set out by powerful business lobby groups, here’s all you need to know about how the judgement will affect you:

How much extra will I be paid?

It depends how much overtime you regularly do. The payments will be based on your average total wages, much in the same way as employers calculate the average pay of their workers to ensure they comply with the minimum wage rules.

It doesn’t actually state in my contract that I must do overtime, but in reality I always have to or I can’t get the work finished. Does that rule me out of this extra cash?

Technically, yes. Today’s judgement was about groups of workers whose overtime was stipulated in their contracts, yet who were not paid for those extra hours when it came to holidays. Regular “voluntary” overtime is not covered, and may have to be tested in future tribunals. However, unions say it is clear that the spirit of today’s judgement is that employees deserve to be paid for the regular hours worked.

Will I be paid extra for every week off I take?

Up to four weeks, yes. After that, the new rules do not apply.

What about back pay? Can I claim for all the years my employer has underpaid me?

Highly unlikely. The way the judgement was worded greatly limits the likelihood of backdated pay claims being allowed. But it does allow for any money that should have been paid in the past three months.

So how do I claim for my August holiday?

Consult a lawyer or the Citizens Advice Bureau. It seems that technically you should lodge your claim in the employment tribunal process, where costs could eat up any of the additional pay you feel you are owed. Try approaching your employer first, bearing in mind that the three-month clock started ticking today if you want to take the legal route.

My pay is highly performance bonus-based. When I’m on holiday I don’t earn bonuses, obviously. Will that change under these rules?

Highly likely, yes. The ruling says other bonuses and allowances should be included in their holiday pay.

Are businesses right to complain?

It is easy to see why they are having a whinge, but there has been much over-reporting of the actual numbers of people affected. Unions say some employers in industries like care homes only get their staff up to the minimum wage by getting them to do some hours at a peak “bonus” rate, while paying them under the minimum for many of their hours. Then, when it comes to holiday time, the worker will only be paid the lower “basic” rate. It is this kind of practice that the judgement seeks to defeat.

Will it affect my future pay rises?

Possibly. Some employers are likely to use the extra burden as a reason to keep pay low.