A ground-breaking case at an Employment Appeal Tribunal has decided to include overtime in holiday pay.
That means staff working voluntary overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay. Details, including on whether claims can be backdated, have yet to be released and, as the ruling is likely to go to the Court of Appeal, a final decision may be years away.
The ruling has widespread implications for all companies paying overtime to their staff. The government estimates that one-sixth of the 30.8 million people in work get paid overtime. This means around five million workers could be entitled to more holiday pay.
Commenting on the ruling, Adam Marshall of the British Chambers of Commerce said:
“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 the billions. Firms which have complied with existing regulations are shocked by the thought of having to back-pay holiday entitlements – a change they could not have predicted. 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.”