Overtime / holiday pay ruling - how this is going to impact your business

Alan Price – CEO at BrightHR

November 05 2014

Employers of every size, particularly in the retail, manufacturing and hospitality sectors, may be significantly affected by an Employment Appeal Tribunal judgment which was issued on Tuesday November 4th. This is both a significant and historic benchmark and will create a red-tape headache for many employers.

The financial consequences of this judgment could be huge for employers, potentially requiring both a re-adjustment for payments to be made in the future and, more importantly, large claims for back pay from every employee. Imagine the impact on small businesses.

The judgment was in relation to the pay that employees who work overtime are entitled to when they take a holiday. The EAT said that the usual practice of paying only basic pay to employees, who work overtime, when they take a holiday is unlawful. Holiday pay, the EAT said, must be increased to take into consideration the overtime worked. Because claims of this nature can be made in relation to previous underpayments which can be linked together, employees may be able to make a claim that they were not paid enough in relation to every single holiday they have taken going back to the start of their employment. In some cases, this could reach back as far as 1998.

At Peninsula we have already experienced an influx of calls from employers seeking advice and guidance on the issue. Due to the heavy press that this has already received, we expect employees will become fully aware of the judgment and will approach their employer with questions and queries. Peninsula we have employment law consultants available 24 hours a day ready to help and assist businesses.

There are some restrictions contained within the judgment in relation to the specific type of overtime covered, and about the time limits which apply to making a claim. This means that a detailed analysis of each employee’s personal situation is required to work out any potential cost to the employer.

Peninsula, the UK’s largest employment law consultancy have implemented a team of consultants to advise employers on the impact, what they now need to do and how to protect themselves and their business from back claims. For free advice please call 0800 028 2420, we will advise you on what you need to do and how to proceed as we expect many employers to receive back pay requests and questions from employees.

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