The Court of Appeal has overturned a decision of the Employment Court in relation to payment of holiday pay on discretionary bonus payments.

The Employment Court had held that the bonus payments were subject to holiday pay because they were gross earnings.

The Court of Appeal disagreed and said they were not gross earnings, because the bonus scheme said there was a discretion not to pay a bonus even if all conditions of the scheme were met.  Therefore there was no contractual or legal obligation to pay the bonus and they were not part of gross earnings and therefore not subject to holiday pay.

This will be an immense relief to employers who have discretionary bonus schemes and who have not paid holiday pay on top of the bonus as 8% of bonus payments for each year would soon add up to a substantial unbudgeted sum.

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