The judge confirmed that regular additional payments such as overtime should be included in the calculation of holiday pay. The ruling only applies to holiday pay guaranteed under the Working Time Directive which covers the first 20 days of annual leave each year.
This means that going forward employers will have to work out what an employee has actually earned and reflect this in pay when the employee takes annual leave.
The judgement also contained a surprise ruling that significantly restricts the ability to claim back pay for previous underpaid annual leave.
Any claim for unpaid wages has to be made within three months of the underpayment. Claims can be made for a series of underpayments, but only if there is less than 3 months between underpayments.
The EAT decision may be appealed but for now any underpayments must be linked by gaps of less than three months in order to form a series for back pay claims. Click here for more details, examples and action to take if you think you are affected ...
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