Back in the late 1990s, the Working Time Regulations 1998 (WTR) were introduced in the UK. They implemented European Union laws aimed at governing, amongst other things, the minimum amount of holiday that workers were entitled to receive and the minimum amount of holiday pay that their employers were required to pay. Nowadays, following a few amendments along the way, the WTR entitle all workers to a minimum of 5.6 weeks’ paid holiday each year. In most cases, calculating a worker’s holiday pay is quite simple. As someone who works 5 days per week, I am entitled to a minimum of 28 days’ holiday each year, including the 8 normal bank and public holidays. On the basis that I receive a fixed annual salary, when I go on holiday, I just receive my normal salary payment, as if I had been at work. 

Unfortunately, not all cases are as simple as my own. Indeed, the law can become fiendishly complicated when you try to apply it to people with fluctuating hours of work and/or fluctuating levels of pay. So what have the courts said about all this? Traditionally, lawyers have worked on the understanding that only a worker’s basic pay needs to be taken into account when calculating holiday pay. This has meant that if a worker works a standard 35-hour week but is routinely asked to do paid overtime, then when s/he goes on a weeks’ holiday, s/he is only paid for 35 hours. Employers have rarely factored in to their holiday pay the overtime that the worker might have worked had s/he not been on holiday. Cases dating from the early 2000s suggested that this approach was legally correct. However, over the last couple of years, we have seen a number of cases that have looked carefully at this issue and begun to reach distinctly different conclusions. Bear Scotland v Fulton And so we come to the recent decision in the case of Bear Scotland v Fulton, which has received considerable press attention in the last week or so. This concerned the question of whether employers are required to take account of ‘non-guaranteed overtime’ when calculating holiday pay. By ‘non-guaranteed overtime’, we mean overtime that the employer is not obliged to provide but which the employee is required to work if it is offered. 

The Employment Appeal Tribunal (EAT) reached a very clear decision that overtime of this sort made up part of a worker’s normal pay. As a result, the EAT ruled that it should be factored in when correctly calculating a worker’s holiday pay. So what does this mean? This decision is consistent with a run of recent cases that suggest that many businesses have been undervaluing the holiday pay that they should be paying to their workers. If you provide paid overtime to your staff or indeed pay commission or other supplements, but do not currently factor these payments in when calculating holiday pay, then it is time to review your practices. Bearing in mind the amount of media coverage given over to the result of the Bear Scotland case, there is every chance that your workers will now be aware of their rights. So burying your head in the sand and hoping that this whole issue will go away is no longer an option.