Holiday pay must include overtime

THE employment appeal tribunal (EAT) has ruled that overtime should be included in holiday pay.

However, the rights for back-dating claims are very limited – a move welcomed by Squire Patton Boggs which acted for two of the employers involved, Amec and Hertel, sister title WSB reports.

Employers could still face a substantial bill due to historic commission payments not included in holiday pay resulting from a European Court of Justice (ECJ) ruling.

As WSB reported in May, the ECJ noted in Lock v British Gas that a salesperson’s holiday pay could not be limited to their basic salary.

Today, the EAT added in the three co-joined cases that overtime should also be factored in when making this calculation.

Squire Patton Boggs partner Andrew Stones said concerns held by the entire business community about sizeable historic holiday pay claims “should largely be alleviated” following the judgment of the Employment Appeal Tribunal.

“Although opinions are mixed and we do not agree with some of the findings, we are pleased with the limits put in place on retroactive claims,” he said.

“The EAT has really limited the scope for different holiday pay periods to be linked together as one ongoing series of deductions for historic claims. This finding will significantly limit the scope for such claims in the future and the flowing potential liability for companies.

“While there are likely to be many businesses across the country, both big and small, that are still concerned about how this judgment could impact them, this is a very significant and positive finding for employers worried about retrospective liability.

“In terms of what employers should be doing now, it seems sensible to wait and see if any of the parties appeal. Nevertheless, employers may wish to begin considering how the findings affect the way in which they are currently calculating holiday pay,” he added.

The appeal tribunal ruling follows an appeal by Amec and Hertel over an Employment Tribunal decision in February which found workers were entitled to overtime in holiday pay calculations.

The cases against Amec and Hertel were brought by trade union Unite on behalf of 16 members at the West Burton power station site in Nottinghamshire.

During that time Unite argued that they were consistently required to work overtime and received payments for travel time.

Payments for that work were not included in holiday pay, meaning that the workers received considerably less pay when on holiday, compared to when they were working, it added.

Unite executive director for legal, membership and affiliated services Howard Beckett said: “Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to. This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order.”

Linklaters employment and incentives partner Jean Lovett explained that the potential financial implications for many employers could be significant, but predicted there would be further appeals.

“The number of potential claimants across various sectors and industries is vast,” she said.

“The law on holiday pay has been in a state of flux for sometime. However, we envisage that the EAT’s decision will not be the last word on this issue. As significant sums are involved, we expect the decision to be appealed.”

“Due to the costs involved many employers may now look to reduce the availability of overtime, where feasible,” she added.