Almost all employees are entitled to 5.6 weeks paid holiday per year, but what rate should this based on: their basic pay or should it include any overtime or commission?
The Working Time Regulations Act 1998 declares that employers should use basic pay to calculate holiday entitlement, but this contradicts the European Working Time Directive (EWTD) which states that overall remuneration should be taken into account when calculating holiday pay.
The discrepancy between UK and European law came to prominence in 2014 when a British Gas worker took a case to the European Court of Justice; his pay was 40% basic and 60% commission. The case ruled in favour of the employee, setting a precedent for how workers’ holiday pay is calculated.
If your employees feel they are not receiving the correct pay they could take it to a tribunal and backdate their claim for up to 2 years. Therefore, in addition to legislation, it is important to calculate holiday pay based on the EWTD.