Important case on overtime entitlement on holiday pay

The long awaited decision of Bear Scotland v Fulton as to whether overtime should be included in the calculation of holiday pay has been handed down. As what can only really be described as a triumph for employees, the Employment Appeals Tribunal concluded that:

Non-guaranteed overtime (i.e. overtime which the employer is not obliged to offer) should be included in the calculation of salary paid whilst a worker is on annual leave;

The inclusion of such payments will only apply to the first 4 weeks of annual leave and not the additional 1.6 weeks provided for under UK law;

A worker is not limited just to claiming underpayments for the last 3 months.Rather they can claim for underpaid leave as far back as the underpayments may go (via a claim for unlawful deductions) provided there are no breaks of more than a three months in between underpayments.Of course the claim must still be brought within 3 months of the last underpayment (as extended by the ACAS conciliation period);

Taxable travel time payments (i.e. those which exceed mere travel expenses) should not be included in the calculation of holiday pay.

It was also found (due to specific contractual provisions that were in issue) that overtime should have been included in the calculation of a payment in lieu of notice, although this was specific to the facts of this case and was not advanced as a general proposition.

The decision itself is complex and so we would urge employers to obtain independent advice on the application of the judgment to their particular circumstances and whether there are any steps which need to be taken as a result.

The risk of retrospective claims arising from employees is more limited than was potentially the case.

Permission has been granted to appeal this decision so it is possible that the above could be overturned by the Court of Appeal. We are therefore unlikely to have heard the last of this yet. The Government is however being proactive and has set up a Taskforce to consider the impact of this decision and the options available.

If you require any advice or assistance on how this judgment may affect you please contact our employment team on 029 20 34 55 11 or