A multi million pound tribunal has taken place today that states overtime should be taken into account when holiday pay is issued.
In this ground-breaking case- the Employment Appeal Tribunal stated that employees should not only consider basic pay when it comes to holidays but also any overtime an employer has worked.
"This will have huge repercussions for UK employers. Whilst today’s judgment is highly technical the core message is quite clear: employers who pay only basic pay during holidays are selling employees short. Holiday pay is an issue that impacts every business and many employers now face a whole-sale rethink of how they pay their employees and calculate costs," said Paul McFarlane, partner at Weightmans law firm.
The case included employees of Hertel, Amec and Bear Scotland.
The 1998 law reads that holiday pay should be at the basic rate of pay, but when it comes to overtime there is no black and white.
The rule today was that voluntary overtime coupled with being on call should be taken in account when holiday pay is given to the employee.
As it stands 5 million workers, or a sixth of the UK workforce do overtime.
The government has spoken out against the changes. "We do not believe voluntary overtime should be included in holiday pay and are concerned about the potential impact on employers," a spokesperson from the Department for Business, Innovation and Skills told the Telegraph.
The British Chambers of Commerce, the Institute of Directors and the Federation of Small Businesses have said that the so called ‘holiday time bomb’ could seriously impact small businesses.
“It is not an exaggeration to say that some small businesses could end up being wiped out if employers who have acted compliantly and in good faith face underpayment claims backdated as far as 1998,” said the IoD’s Simon Walker.
“Not only do businesses face a huge spike in operating costs, but employees would also be encouraged to book holidays following bonuses or good overtime periods as it would enhance their pay. This would be an administrative nightmare on a number of fronts,” he added.
The FSB have suggested that any backdated pay should be prevented via an emergency legislation to prevent small businesses going under.
“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 John Allan, FSB National Chairman. "The government needs to make sure that good employers, supplying much needed jobs, are not forced under by a series of backdated claims.”
Source: The Telegraph
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