FIRMS are facing a holiday headache as they confront new European Union rules, a lawyer has warned.

Ashley Gurr, partner and head of employment at Redditch-based Kerwoods Solicitors, cautioned holiday pay bills could soar as staff who work shifts, receive allowances or earn commission claim their full entitlement. This summer will be the first time new European case law on the calculation of holiday pay makes its presence felt.

“I would anticipate that many companies simply aren’t prepared for the change,” said Mr Gurr. "But they need to be on the ball otherwise they could get hauled before the tribunals.”

Previously most employees received only their basic salary when taking annual leave. However, last year, this was ruled to be unlawful as it discouraged those who earned the majority of their income from overtime, allowances and commission, to take time off. Now, employers must pay the equivalent to what an employee would normally earn, should they have been at work during that holiday period or face the tribunals awarding the underpaid money.

Mr Gurr added: “The sorts of sectors who will benefit are care home workers, nurses, sales staff and those on zero hours contracts. But it could all get messy when it comes to the calculations. After all, what is a typical day? Employers will need to be careful in their undertaking of the reviews. I can see plenty of scope for argument.”