Working Overtime Counts Towards Holiday Pay, Supreme Court says

Following a landmark ruling by the Supreme Court, businesses will have to include overtime as part of an employee’s holiday pay entitlement. This underscores the stringency of the law surrounding holiday pay and sets a critical precedent for employers to accurately compute holiday wages.

This comes in light of a Supreme Court ruling on Wednesday in favour of backdating revised holiday pay rates for police staff against the Police Service of Northern Ireland (PSNI). The outcome of this ruling means that over 3,700 PSNI officers and support workers will finally receive at least £30 million in unpaid holiday wages.

In 2019, the Northern Ireland Court of Appeal (NICA) ruled that employees, including PSNI officers, had been denied rightful holiday pay for years due to flawed calculations based solely on basic pay, neglecting elements like voluntary overtime.

The court ruling could have far-reaching implications for workers across the UK. So, what does this mean for UK employers?

Unlawful Wage Deduction Fallout: Prolonged Liability, Staggering Compensation, and Reputational Damage

In England, Scotland and Wales the government introduced legislation to limit how far back individuals can bring unlawful deduction from wages claims to 2 years but could be longer in other cases. Northern Ireland didn’t do this.

But, even with these restrictions, some employers will still have to pay their staff an eye-watering amount to settle cases, not to mention a damaged reputation.

Prioritising Holiday Pay Compliance: Variable Earners and Zero Hour Workers

It’s time to tighten up holiday pay compliance measures! Ensure that workers receive their entitled holiday pay for variable pay (overtime, commission) not just zero-hour workers.

This issue goes beyond mere principle; it extends to matters of health and safety. Employees who work overtime but are compensated only with their basic salary during holidays may hesitate to take time off due to concerns about lost income. This can lead to burnout, reduced workforce productivity, and financial hardships, such as difficulties meeting mortgage payments.

The Challenge of Accurate Holiday Pay Calculations

One of the primary challenges businesses and payroll bureaus face is the intricacy and time-consuming nature of holiday pay calculations. Since the law underwent revisions in 2020, there has been a tendency to resort to shortcuts and “simpler” yet non-compliant methods for calculating holiday pay. Using an automated payroll system will be a key turning point for these businesses.

paiyroll® offers an automated solution to swiftly and compliantly calculate holiday pay. Perfect for various worker types, including salaried fixed-hours workers, variable earners (commission, overtime, etc.), and zero-hour workers, our system eliminates the need for manual calculations.

To learn more about how to compliantly and automatically calculate holiday pay, book a free personalised demo with us.