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Overtime 'should be included in holiday pay'

Tue 04 Nov 2014

The Employment Appeal Tribunal has ruled that overtime should be included in holiday pay.

Under the existing system, only basic pay is considered when holiday pay is being calculated.

However, workers at engineering firms - Bear Scotland and Hertel - argued that they should have been paid more, as they completed voluntary overtime before taking time off.

The Employment Appeal Tribunal has now ruled in their favour, although it is unclear as yet whether or not any claims can be backdated.

Brian Gordon, managing director of Bear Scotland, said the firm is disappointed with the decision, as it believes it was "complying with UK law and common industry practice as some of the employees concerned brought their cases following TUPE (transfer of undertakings) transfer from other employers".

He stated that this interpretation of the Working Time Directive is "significant" for all UK employers in the public and private sectors.

The ruling has been welcomed by Howard Beckett of trade union Unite, who said it "secures justice" for workers who have been "short-changed", while it means employers have "got to get their house in order".

He added that it should ensure employees who are required to do overtime can no longer be "penalised for taking the time off they are entitled to".

Concerns about the possibility of claims being backdated have already been raised by the Institute of Directors, which said it could have a "hugely detrimental impact" on firms across the country.

Simon Walker, director-general of the body, suggested it could lead to some small businesses being "wiped out" and trigger a "huge spike in operating costs".

In addition, he said it could encourage employers to "book holidays following bonuses or good overtime periods as it would enhance their pay", thereby creating an "administrative nightmare on a number of fronts".

Eleanor Gilbert, senior associate at Winckworth Sherwood Solicitors, commented: "While this case will have a significant impact on the way in which holiday pay is calculated for many businesses, it only concerned normal overtime and it may not extend to most bonuses which are usually discretionary and are unlikely to form part of employees’ ‘normal remuneration’ for hours worked”.

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