Holiday Pay Chaos for Employers After Landmark Court Ruling

Employers are facing up to having to make extra holiday payments to take account of overtime, after a landmark ruling at an Employment Tribunal this week. Small business owners and domestic employers may find it particularly challenging unravelling the new rules.

A landmark UK court ruling this week means that employers now have to re-calculate holiday pay entitlements, and if necessary, make retrospective payments to their employees.

The ground-breaking case at the Employment Appeal Tribunal stated that calculations of holiday pay entitlement had to include not only basic salaries but also overtime. Employees doing voluntary overtime will be able to make claims backdated three months.

For unsophisticated employers, this could give them an unanticipated payroll nightmare. Many employers of nannies, who are usually parents of small children, may find it very unchallenging unravelling the new requirements regarding their nanny’s holiday pay.

Sara Graff, owner of Taxing Nannies, a UK nanny payroll service, advises: “If you pay overtime to your nanny, you have to include those extra overtime hours, as well as the basic pay, in your calculations of your nanny’s holiday pay."

“Many employers also aren’t aware that a full-time employee is now entitled to 28 paid holiday days a year. This entitlement needs to be included in the Contract of Employment.”

Many employers of nannies struggle with calculating their nanny’s pay and tax when there is a circumstance that is out of the ordinary. These situations can include maternity pay, nanny shares, sick pay for their nanny, and holiday pay. 

Taxing Nannies is one of the longest-established and most highly respected nanny tax and payroll services in the UK. It helps employers of nannies through the tax and payroll minefield, which can be daunting for even experienced employers, let alone new employers such as parents of small children.

Taxing Nannies is led by Sara Graff, a Chartered Accountant for more than 25 years, and a Mum who has employed many nannies.

When Mrs Graff realised how complicated calculating her nanny’s tax was even for herself, an accountant, she realised that there was a great need for a service that took this burden off harassed and busy parents. She set up Taxing Nannies, which will shortly celebrate its 20th anniversary.

A guide to the complexities of calculating nanny holiday pay can be found at

Guide to nanny holiday pay

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