Holiday Pay & Overtime - A Landmark Judgement...?
02 December 2014
The media have described recent holiday pay case law as ‘ground breaking’ and are suggesting a ‘holiday pay windfall’ for employees which was well received by both staff and unions. However, there has been a collective groan from employers who could feel the strain of an alleged increase to payroll costs of 5% and potential employment tribunal claims.
What does this new judgement mean?
The most recent judgement on this hot topic was delivered on 4th November 2014 in relation to the collective cases of Bear Scotland v. Fulton, Hertel (UK) v. Wood and Amec Group v. Law.
- The four main points of the judgement are significant and employers need to take steps to adjust current practices in relation to holiday pay.
- This said, whilst this might be a 'landmark case' in terms of legal precedent, it is not definitive.
- Due to its wide reaching impact on UK employers, it is anticipated this case will be subject to appeal.
- Furthermore, the Lock case has been appealed and a decision is not expected until the new year in relation to holiday pay and commission.
- The government has set up a taskforce to deal with this contentious area of employment law and Vince Cable has commented that the government will review the judgement in detail, and this could mean there will be legislation to add clarity in due course.
What to do now
Whilst subject to intense legal debate, there are steps employers can take in an effort to comply with the recent legal guidance from this case, and to minimise the risk of tribunal claims:
The safest approach is to take action now by:
- Altering holiday pay calculations to now include an average of all remuneration intrinsically linked to the performance of contractual tasks, including commission, overtime and travel time payments, but do this in the recognition that case law under appeal could alter precedent and future UK legislation could offer further change when defined
- Back-dating holiday pay calculations for the last three months to try and 'break the chain' of under-payments to avoid any litigation
- A medium risk appraoch, and one which should be entered with caution, is to calculate the cost of holiday pay including all remuneration paid to employees and keep the additional monies tothe side as a 'fire-fighting' fund for when a definitive decision has been made or should you receive any claims
- A high risk approach, and one we would strongly recommend against, would be to bury your head in the sand in response to the recent judgement. Despite the need for much clarification in future appeal cases and legislation, whilst there would be some tweaking, the inclusion of all remuneration within holiday pay is very unlikely to change and it would be remiss to ignore this.
Holidays in the UK have been a subject of great debate in recent years with cases such as Stringer covering holidays and sickness absence. This recent judgement, alongside the Lock case, continues the legal turbulence around holiday pay calculations. We hope that the media and union suggestion of windfalls in relation to holiday pay are nothing more than hype, but regardless, we urge employers to take cognisance of this and future judgements.
Further Information & Support
If you would like further information on holiday pay and overtime, or other aspects of managing the employment life cycle, French Duncan HR Services would be delighted to assist you. Please contact Louise McCosh who leads the French Duncan HR Services team on 0141 221 2984 or email email@example.com to arrange a free consultation.