Holiday Pay for Temporary Workers – an Update for Recruiters

A recent ruling on calculating holiday pay could have significant implications for any recruitment agency that has temporary workers on its books. Here, we take a closer look at what it could mean for you.

On June 10th the Court of Appeal came to a decision in the case of Flowers and others v East of England Ambulance Service NHS Trust concerning whether or not overtime should be included when calculating ambulance workers’ holiday pay. An initial ruling in 2017 agreed that mandatory and non-guaranteed overtime should be included, but that voluntary overtime should not. The Employment Appeal Tribunal later decided that in this case, voluntary overtime should in fact be included, and the Court’s ruling upheld this decision.

In effect, this is simply in line with the EU Working Time Directive (2003/88/EC) that requires voluntary overtime to be included in holiday pay if it’s sufficiently ‘regular and settled’ to be seen as normal remuneration. In the case of the ambulance workers, they regularly worked extra shifts and thus saw a drop in pay when they took a break. However, it was also recognised that the nature of their work was such that their overtime was regular and unavoidable – as they couldn’t stop during a medical emergency, so the unique facts of the case did influence the outcome.

So, what are the implications of this ruling for agencies and temporary workers?

Before 10th June, overtime wouldn’t necessarily be included when you’re working out temporary workers holiday pay. Now, you’ll need to consider whether the overtime they do is regular enough to be considered an essential part of their earnings, which is why there’s still a question mark over how much it will affect agencies. No guidance was given on how to decide if an employee’s (or in your case, a temporary workers) voluntary overtime is ‘sufficiently regular and settled’ – so effectively it’s up to the agency to make the decision in each case.

Nevertheless, it’s worth remembering that the overarching principle that lies behind all this is that workers should earn their “normal” remuneration when on holiday. The direction of travel is clear. If overtime is usually paid each week and is regular across time, then it will increasingly likely to be deemed as counting for holiday pay purposes.

It’s also worth noting that if a temporary worker feels deterred from taking annual leave because their pay will drop, they could make a claim against you for being in breach of the Working Time Regulations. However, there’s no need to worry about recalculating holiday pay of backdated claims for work done before 10th June. Having flexible holiday pay calculation systems that enable such changes to be seamlessly made is where working with Back Office could certainly help.

As well as keeping you up to date with all the latest industry developments, Back Office can handle all your admin including calculating holiday pay. To find out more, call the Back Office team on 01260 280 290.

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