UK Employment Appeal Tribunal’s decision could expose UK employers to claims of underpaying holiday pay in the past.

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On Tuesday, 4 November 2014, the UK Employment Appeal Tribunal (EAT) issued its decision in Bear Scotland Ltd & ors. v Fulton & ors. and other consolidated appeals. The EAT ruled that voluntary overtime pay should be included in employee holiday pay. The EAT decision has wider implications on the complex question of how employers should calculate the amount of pay that employees receive during periods of holiday absence. Many employers, relying on the UK rules, have limited holiday pay to basic salary (excluding overtime, commission and other allowances). This week’s EAT decision confirms that this approach is not always adequate and employers could now face retrospective claims for the underpayment of holiday pay.