Calculating Holiday Pay for employees with fixed hours

Recent items in the news have caused some confusion over whether overtime should be included when calculating holiday pay.

The Employment Rights Act 1996 states that when calculating holiday pay for employees, the amount of a week’s holiday pay is the amount payable for a week’s work under the contract of employment.

Recent court judgements have expanded the Employment Rights Act and have ruled that guaranteed and non guaranteed overtime should be taken into consideration when calculating a week’s holiday pay.

Guaranteed overtime is where the employer is obliged by the contract of employment to provide and pay for agreed overtime.

Non Guaranteed overtime is where the employer is not obliged to offer overtime but when it is offered the employee is obliged by the contract to work it.

Voluntary overtime is where the employee is free to turn down the request as there is no contractual obligation on either side to offer or refuse overtime. There is currently no definitive case law to suggest that voluntary overtime needs to be taken into account when calculating holiday pay.

Further information can be obtained from the ACAS website