Holiday Pay and Overtime

Emma DavisPosted 4 October 2017 By Emma Davis, HR Consultant In Human Resources

Much has been made of what should be included in holiday pay. Numerous cases have resulted in some definitive legal decisions. We have outlined here the differences and what applies…

Compulsory, guaranteed overtime. This should be taken into account when calculating holiday pay in respect of the full 5.6 weeks (28 days).

Compulsory, non-guaranteed overtime. This should be taken into account provided it is sufficiently regular to be considered ‘normal’ pay. This is with respect to only the 4 week’s statutory holiday (20 days) and not the additional 1.6 weeks or any contractual holiday entitlement in excess of that.

Voluntary Overtime. The most recent decision to be made.  The Employment Appeal Tribunal has concluded that voluntary overtime should be taken into account when calculating holiday pay. This conclusion was reached on a certain case and it was stressed that tribunals must consider cases on an individual basis and there wasn’t one standard rule for everyone. In summary, if it is considered that the overtime is classed as ‘normal’ pay it should be factored in.

Results-Based Commission. This should be taken into account and the amount should reflect the commission workers would have earned if not on holiday. Again, this is only in respect of the statutory 4 weeks’ holiday.

Clear?  Sort of……

There remains a lack of clarity on how things should be calculated and what reference period to base calculations on.

In many scenarios applying consistency across the process will mean as an employer you have applied the rules fairly and equally, even if that means there are ‘winners’ and ‘losers’.
When a ‘reference period’ is required often the standard average of the last 12 weeks is applied. This could be a useful starting point.

It is useful to keep clear payroll records showing the differences in payments (itemise compulsory guaranteed overtime, compulsory non-guaranteed overtime, voluntary overtime, commission, etc.) in the event of any challenge. Claimants can only claim 2 years’ of back pay if they are successful at tribunal.

 To discuss this or anything else please contact Emma Davies on 01793 818300 or send her an email,


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