EAT ruling on payment of overtime in holiday pay
It has been dubbed the “holiday pay time bomb” in the press and this morning the Employment Appeal Tribunal’s (EAT) judgment on the overtime and holiday pay case is yet more bad news for employers.
The EAT has ruled that voluntary overtime should be included in the calculation of holiday pay. The decision was viewed as rather inevitable following the decision earlier this year from the European Court of Justice that holiday pay should comprise of both basic salary and commission.
The decision today affects millions of workers and some estimates suggest that it could cost UK employers billions of pounds in backdated pay because claims could go back to the introduction of the Working Time Regulations in 1998.
There is pressure on the government to intervene with emergency legislation as organisations supporting UK business warn that this could lead to financial pressure for some employers.
The government has today announced a taskforce to look into limiting the impact of the judgment. Employers need to have a plan of action on how to deal with holiday pay calculations going forward, but they also need to prepare for backdated claims including provisioning the cost of potential claims and warning their FDs. However, we would advise employers to sit tight regarding payments of any back pay until the government has decided whether or not it will intervene with emergency legislation.
In the meantime we are happy to meet with you to look at your longer term holiday pay strategy. Contact a member of our team today ...
asb can help
Plenty to think about as always. These things may already form a part of your people strategy. If you are struggling to formulate that strategy, and need some guidance, then we would be delighted to sit down with you and share some of our insight.
To discuss your people strategy, please contact Gregory Burgess, Partner, Head of Employment.
Published: 8 Dec 2014