Overtime and holiday payments: what does the latest ruling mean?

t the beginning of November an employment tribunal upheld an appeal, ruling that employers should include overtime hours worked when calculating holiday pay. What does this mean for employers?

The ruling has sent shockwaves not only through the labour market, but it would seem through government too. Vince Cable responded by announcing a task force to assess the impact on businesses – and how that impact could be minimised.

The cases are also likely to go to the Court of appeal and the IoD is pressing for changes to the law, so the bottom line is that the latest ruling is not the end of the story by any means.

So where do you stand as an employer and what should you do?

Most employers will probably ‘wait and see’ for now, rather than change how they calculate holiday pay or make any back payments. Some have said they will review their overtime policies.

In most cases your exposure to back payments is likely to be limited, as employees can only claim for underpayments made within the previous three months.

Looking ahead, there are no clear guidelines from the ruling as to how you should calculate holiday pay, but the rule of thumb appears to be you should include overtime hours regularly worked.

We will be keeping a close eye on developments. If you would like to discuss holiday pay or any aspect of employment law, please get in touch.


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