Should overtime payments be included in holiday pay? Employment Law

In 2014 the Employment Appeals Tribunal ruled that overtime payments should be included in employee holiday pay when calculating ‘normal pay’. For people who work different hours due to overtime (not voluntary overtime), their holiday pay needs to be calculated in a way that takes this extra money into account.

The best way to calculate holiday pay is to base it on an employee’s average rate of pay from the previous 12 weeks unless work is seasonal, in which case the average should be taken from the previous 52 weeks. (Subject to legislative change in April 2020 to 52 weeks.)

Remember to include overtime, commission, bonuses, travel time payments and shift premiums. When it comes to bank holidays, you can just pay the basic salary as the rules only apply to the 20 days of holiday required under EU law.

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