‘Much to be resolved’ following holiday pay ruling

Yesterday’s ruling that overtime will be included in holiday pay calculations still leaves uncertainty over many issues, according to CIPD employee relations adviser Mike Emmott.

The employment appeal tribunal (EAT) judged that all holiday pay should include overtime as well as basic pay considerations, finding in favour of two employees rather than their employers. But Emmott warns that this will not necessarily lead to large backdated payments for swathes of workers.

“The ruling leaves much to be resolved – particularly on the issue of backdating,” he said. “Employees who may have been hoping for an instant bonanza would be wise not to count their chickens before they’ve hatched.”

PwC partner John Harding added that this judgement is “a very serious issue” for British businesses, but argued that it is not as severe as some had feared.

“Businesses can take some comfort in the fact that the extent of backdated claims may be substantially reduced or even ruled out if there is a gap of three months between holidays. The limitations on backdated claims could considerably limit the potential cost for some employers,” he said.

But he warned that the ruling could still end up costing UK businesses billions of pounds and urged them not to underestimate the potential impact.

“Employees are likely to jump at the chance to claim back any extra money due to many seeing little real increase in their earnings in recent years,” he said.

CBI director-general John Cridland echoed the warnings about the cost to UK employers, calling the ruling “a real blow” to business. He urged the government to challenge the judgement and to “stand up for British business”.

Meanwhile Christopher Fisher, employment partner at international law firm Mayer Brown, called the decision “unsurprising” given recent trends. But added it’s “not all bad news for employers” – especially around the possibility of disallowing claims due to a three month gap between underpayments.

“In practice this should mean most retrospective claims for underpayment of holiday pay cover only the most recent holiday year, if at all,” he said. “On this element of the decision however, permission has been given to appeal to the Court of Appeal and so we may not have heard the last on this issue.”