There have been a number of recent court decisions surrounding entitlement to holiday pay, specifically whether or not overtime, commission and work related travel should be factored into holiday pay calculations.
A court decision 18 months ago found that contractual (but not voluntary) overtime must be included in holiday pay calculations. A more recent decision, earlier this year, followed up that judgement by confirming that a worker who received performance related commission was entitled to have this taken into account when his holiday pay was calculated.
What, however, is particularly unhelpful, is that the court did not explain how the holiday pay should be calculated to take account of lost commission. As ACAS’s website currently states “There was no definitive legal answer about how such holiday pay calculations must be made, or how/if such claims can be backdated. ACAS continues to monitor the case and will provide further updates when they are available.”
Therefore, whilst the legal obligation on employers is clear, that commission and contractual overtime must be included in holiday pay calculations, it is still unclear as to how some of this should be calculated and whether employees will be able to make backdated claims. The case may also be subject to further appeal.
Our expectation is that the maximum period for backdating a claim will be 2 years, based on the recent legislation put in place in July 2015 by the government, which limited unlawful deduction of wages claims to a 2 year period. This law prevents an employment tribunal considering deductions which were made more than 2 years before the unlawful deduction claim was brought.
A useful summary of the rules can be found here: http://www.acas.org.uk/index.aspx?articleid=4109
Given that this is an area of employment law, which, as mentioned above, is not yet clear, we would recommend that any clients who wish to seek further advice on this matter should contact an employment lawyer.