Taskforce bid to limit impact of holiday pay ruling

2 December, 2014

Business Secretary Vince Cable has set up a taskforce to assess the potential impact of an employment appeal tribunal ruling on overtime and holiday pay.

The taskforce is made up of representatives from government departments and business groups, including the Confederation of British Industry, British Chambers of Commerce and the Federation of Small Businesses.

Dr Cable said on 4 November, the day of the tribunal ruling: “Government will review the judgment in detail as a matter of urgency. To properly understand the financial exposure employers face, we have set up a taskforce of representatives from government and business to discuss how we can limit the impact on business.”

In its ruling, the tribunal decided that holiday pay should reflect non-guaranteed overtime, where there is no obligation by the employer to offer overtime but if they do then the worker is obliged by the contract to work overtime.

The Department for Business, Innovation & Skills advised employers and employees seeking clarification to contact workplace relations expert Acas, which has issued guidance on the issue, for free support.

The appeal was brought by the Unite union on behalf of 16 members working for Amec and Hertel as electricians, scaffolders and semi-skilled operatives at a power station site in Nottinghamshire. It also involved road maintenance employees at Bear Scotland.

Although the employees were required to work overtime, overtime pay was not reflected in their holiday pay so they received lower wages when on holiday than when at work. Unite said that for some workers, this meant they received less than half their normal pay when they were on holiday.

The 4 November ruling, which upheld an employment tribunal decision made earlier this year, centres on interpretation of the European Working Time Regulations, which were implemented in the UK in 1998.

While these give all workers the right to paid annual leave, they do not specify how a worker’s pay should be calculated, which has historically been left to national legislation to determine.

It has been estimated that around five million workers in the UK are paid for overtime and that the ruling could open the door to a significant number of backdated claims. The employment appeals tribunal ruled that workers could make such claims, but these will only be allowed if less than three months had passed since their last incorrect payment.

The tribunal also gave permission for the judgment to be appealed at the Court Of Appeal.

Link: Acas guidance