Impact of landmark holiday pay judgment revealed Employers call for government intervention to offset backdated pay costs A landmark judgment from the Employment Appeal Tribunal (EAT) to include overtime in holiday pay with potentially costly implications for UK businesses has been announced. The decision – which could affect up to 5 million workers according to government figures – confirms that elements of remuneration such as overtime and commission must be included in the calculation of holiday pay. The judgment that was handed down today (Tuesday 4 November) concerned the calculation of holiday pay in three cases: Bear Scotland v Fulton and Baxter, Hertel (UK) Ltd v Wood and others and Amec Group Ltd v Law and others. It has been closely monitored by businesses, trade unions and the government with all involved anticipating claims of hundreds of millions of pounds in back pay for the past 16 years. However the details of the ruling, particularly on whether claims can be backdated, have yet to be released. “It is astonishing that a law drafted 20 years ago is so imprecise that such a huge change can be made without any reference to the voters. Ultimately this is the fault of the Major government for not engaging in the detail of the [Working Time] Directive because they planned to opt out of it anyway. The lesson for all governments is that EU legislation should be made much more precise to avoid shocks, said James Lynas, partner at Winckworth Sherwood law firm. Employer groups have suggested that UK businesses could stand to lose billions of pounds in higher wage bills, and companies could react by holding back pay rises. This could “have a knock-on impact on talent retention”, said Chris Tutton, employment partner at national law firm Irwin Mitchell. More than nine out of 10 manufacturers are set to see payroll costs spiral, according to a survey from EEF, the manufacturers’ organisation. And this could mean significant job losses as business struggle to survive, the CBI said. Diane Nicol, partner and head of employment law at Pinsent Masons, commented: HR directors have been aware of this problem for some time but have not always been able to get the necessary traction with their boards that this is a material risk.” Nicol advised businesses to assess their payroll and HR records to examine the possible exposure to claims and review their current policies to align with today’s ruling. However, Kate Hodgkiss, employment partner at DLA Piper, who advised Bear Scotland said: “The impact for employers is significantly less devastating than feared.” “The judgment significantly limits the potential for back pay liability for employers,” she said. “Any claims in respect of underpaid holiday pay in the past are only possible to the extent that no more than three months elapsed between any such underpayments - in practice this is likely to mean that employees can only claim in respect of one year’s leave rather than, as had been a possibility, in respect of all underpaid leave as far back as 1998.” She explained that the immediate effect of the decision is that the four weeks leave required by the Working Time Directive and the additional 1.6 weeks leave provided by the Working Time Regulations are now payable at different rates. “This will cause administrative headaches for employers and in the long run the government may seek to remove the distinction between the two; however, this is unlikely to be a legislative priority before the election,” she added. The EAT’s decision is likely to be appealed with the European Court of Justice.
Posted on: Wed, 05 Nov 2014 11:50:40 +0000
Trending Topics
Recently Viewed Topics
© 2015