As this item made national news recently, most businesses will already be aware – we’re just flagging it up to underline its importance.
Payments for regular overtime should be taken into account by employers when calculating holiday pay.
An Employment Appeal Tribunal (EAT) has ruled that employee claims for holiday pay can only be backdated for the previous three months; there had been concerns that employers could face claims going back years. The ruling has significant implications for UK employers.
Adam Marshall at the British Chambers of Commerce said of the decision:
“This ruling is damaging for businesses across the UK. Firms could be at risk of incurring significant financial losses, which could force them to close their doors altogether. Managers across Britain are now in the difficult position of having to carry out more complex calculations for holiday pay; estimating overtime and commission rates of staff on holidays. This expanded definition of ‘pay’ is so ludicrous that the government itself has argued against it. No business should have to pay more than base salary during holiday periods, unless they elect to do so.
“What businesses fear most is that these judgments will open the door to backdated claims, which could run into many millions. The pressure being placed on businesses by both the British tribunals and European courts on the issue of holiday pay is becoming unbearable. After the worst recession in living memory, with many companies working to reverse pay cuts and invest in their employees, giant new pay claims could be a huge blow to their growth prospects.”