Businesses in uproar over backdated holiday pay ruling » SMEInsider

Businesses in uproar over backdated holiday pay ruling

The Employment Appeal Tribunal today upheld the claims of workers at three companies that their holiday pay should include overtime in its calculations, not just basic pay – and allowed employees to make backdated claims.

The ruling concerned three cases: Bear Scotland vs Fulton, in which three road maintenance employees argued that their voluntary overtime pay should have been calculated into holiday pay, as well as Amec vs Law and Hertel Vs Wood, in which workers made similar claims. All three companies are likely to appeal.

Millions of workers that regularly work overtime could be affected by the tribunal’s decision. Those that feel short changed will be able to claim the difference for any holiday pay they have claimed at the basic rate over the past three months.

The ruling has been ill-received by the coalition government. A spokesperson for the Department of Business and Skills told the BBC: “We do not believe voluntary overtime should be included in holiday pay and are concerned about the potential impact on employers.”

Many companies are also concerned about the impact that backdated claims could have on their cash flow, and the Federation of Small Businesses has said that employees could create “an administrative nightmare” by deliberately timing their holiday right after overtime-heavy periods to maximise their paycheque.

But workers’ unions point out that employees on low income often top up wages with regular overtime and struggle to afford to take time off is this is not reflected in their holiday pay.

Frances O’Grady, general secretary of the TUC, said: “Failing to count overtime when calculating holiday pay is quite simply wrong. This ruling marks a victory for people who work long and hard to make a living, and who deserve to be properly paid when they take their well-earned leave.”

Scaremongering about the possible impact of this ruling is irresponsible. British business is far more robust than some of its spokespeople would admit.”


  • Richard John Francis

    Be nice if we could see the properly structured / laid out impact of these changes in an analytical manner rather than the spin / counter-spin in the media. All I will say is at an event I attended (Chamber of Commerce) some years ago – people in small businesses raised the issue of these sorts of ‘back-dated’ measures and some even went as far as saying employing people these days is getting worse than root canal. Care has to be taken here – otherwise zero-hours etc will become the norm and no business will wish to create any jobs.

    • LindseyKennedy

      Interesting that you mention zero hours contracts, as on the holiday issue they already have to follow these rules – employees’ holiday pay is worked out based on average hours worked/how much they earned in the period before they claimed holiday pay. Backdating aside, concerns such as people timing their holidays when it is most profitable to do so don’t seem to have created too much of an obstacle for these businesses.

      • Richard John Francis

        Lindsay – I’m not too au-fait (clearly) with the rules of zero hours. There in lies the problem I’m outlining. I’m not even in the mindset TO employ anyone. I’d rather pay out more of my profit margin for contractors and side-step all of the bureaucratic headaches. Sure – if I want to employ someone under 22 I don’t have a problem with the pensions regulator, and their pay would probably be low enough not to worry too much about back-dating holiday pay as the seasonality spikes would not be too bad. The elephant in the room here is the increasingly draconian ‘nanny state’ conditions being applied to employment full stop. I’ve known employer’s who will exploit anyone they can. I’ve known employees who know ‘the rule book’ (& the t’s & c’s of “injury lawyers 4 u”) better than their jobs by a long margin! At what point will trust and common sense return into the workplace with an efficient and lean regulatory framework – not ‘the matrix’? Then (and probably only then) will we see proper solid employment return (rather than hiding masses of the unemployed in colleges of further education – or in low paid mickey mouse jobs that contribute little to the country).

  • Pete

    Oh dear here we go.. Without being branded as a scare-mongerer, one has to wonder how long it will be before we start getting similar calls to the PPI ones; “We can help you get back all of that lost pay..” Cringing already!

    • LindseyKennedy

      “Have YOU had a holiday underpayment at work that wasn’t your fault…?”

      • Pete

        Noooooooo! LOL!