Landmark Holiday Pay Ruling
The Employment Appeal Tribunal has today (Tuesday 4th November 2014) ruled that employees’ holiday pay should now include overtime.
Before today’s decision, only basic pay counted when calculating holiday pay. From now on, employers who provide overtime (even voluntary overtime) will need to calculate the actual weekly earnings of each employee for the purpose of their holiday pay.
Under established employment law, an employee’s weekly earnings are calculated over a 12 week period. At present, it is unclear as to whether the same time period will be used for the calculation of holiday pay or a longer period (52 weeks was suggested before today’s judgment).
At present, it is also unclear whether employees will be entitled to make backdated claims in relation to incorrect payments of holiday pay and if so, how far back these can be claimed. The implications of the judgment are still being digested, however it appears that some safeguards may have been included to provide protection for businesses from facing large retrospective claims for incorrect holiday pay.
Business groups, such as the Institute of Directors and the Federation of Small Businesses, are urging the government to bring in emergency laws in order to curb backdated holiday pay claims. Vince Cable has today confirmed that a government taskforce would be set up to assess the impact of the judgment.
It is worth noting that, given the groundbreaking nature of the decision and the potential cost to business, it is highly likely that the judgment will be appealed. This, coupled with the expected intervention from the government, could mean that the position set out by the judgment could change.
In light of the judgment, employers should give serious consideration to their overtime policies, and may want to consider ceasing to offer overtime and/or overhauling current working arrangements and contracts of employment.
If you are concerned that the decision will affect your business and any overtime policies or arrangements you currently have in place, then please do not hesitate to contact either Rhiain Lewis (01752 513532 / rhiain.lewis@GASolicitors.com) or Rob Zacal (01752 513549 / robert.zacal@GASolicitors.com).
Robert Zacal, employment solicitor