Overtime to count when calculating holiday pay

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People working overtime could be able to claim for additional holiday pay, following a ground-breaking Employment Appeal Tribunal.

Only basic pay currently counts when calculating holiday pay.

Workers will be able to make backdated claims, but only for a limited period. According to Vanessa James, Head of Employment at SA Law, employees could potentially claim as far back as the start of their employment or 1998 – whichever is earlier.

Lawyers expect appeals due to the financial impact of the ruling, which could delay a final decision for years.

The impact of the ruling is significant. According to the government, one-sixth of the 30.8 million people in work get paid overtime.

Around five million workers could therefore be entitled to more holiday pay.

The coalition government and business groups previously argued that overtime should not be included in holiday pay calculations.

Employees can’t claim for overtime if there has been a break of more than three months.

"Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to," said Howard Beckett of the Unite union.

"This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order."

The Federation of Small Businesses estimated the ruling could affect 400,000 businesses and highlighted backdated claims as a threat to their members.

"It seems extremely unfair that businesses who have tried to do the right thing - getting the best legal advice at the time - could be hit with a bill which no one knew was coming," said the group's national chairman John Allan.

The financial impact could be enlarged in 2015, according to Glenn Hayes, employment partner at national law firm Irwin Mitchell.

“It is widely anticipated that employers will also have to include commission payments in holiday pay calculations after a similar case (Lock) is decided in February 2015,” said Glenn.

Vince Cable today announced a new taskforce to look into the impact of the ruling, to be made up of:

  • Confederation of British Industry
  • EEF, the manufacturers’ organisation
  • Federation of Small Businesses
  • British Chambers of Commerce
  • British Retail Consortium
  • Civil Engineering Contractors Association

It’s a shame the CIPD is not included in this list considering the impact on HR and people relationships the decision is likely to have.

About Jamie Lawrence

Jamie Lawrence, HRZone

Jamie Lawrence is editor of global online HR publication and community HRZone.com. He is committed to driving forward the HR agenda and making sure that HR directors have the knowledge and insight necessary to make HR felt across the whole organisation. He regularly speaks to audiences of 250+ and has interviewed key HR industry names, including Daniel H. Pink. He has worked previously as a small business journalist and a copywriter and has published non-fiction that reached #2 on the NYT Children's Bestseller List. In his spare time Jamie likes writing fiction, films, fitness and eating out.


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