As you can expect, the HR world has been stunned by the ruling on holiday pay.
Unite members won a groundbreaking employment appeal tribunal which means all UK employers now need to include overtime pay when calculating workers’ holiday pay.
The case brought by Britain’s largest union, Unite against Amec and Hertel could lead to pay outs worth thousands of pounds and paves the way for similar cases after the appeal tribunal ruled that people obliged to work overtime should have overtime pay and other bonuses and allowances included in their holiday pay.
The 16 Unite members, a mix of electricians, scaffolders and semi-skilled operatives, worked on a project at the West Burton power station site in Nottinghamshire until it came to an end in 2012. During that time they were consistently required to work overtime and received payments for travel time. Payments for that work were not included in holiday pay, meaning that the workers received considerably less pay when on holiday, compared to when they were working.
The appeal tribunal ruling follows an appeal by Amec and Hertel over an earlier Employment Tribunal decision in February which found in favour of the workers and recent decisions by the European Court that workers should receive normal pay when on holiday.
Here, we have collated just some of the reaction from the world of HR:
Business Secretary Vince Cable has announced he is setting up a taskforce to assess the possible impact of the ruling on holiday pay from the Employment Appeal Tribunal.
The taskforce will consist of a selection of government departments and business representative groups. The taskforce will provide a forum to discuss how the impact on business can be limited.
Business Secretary Vince Cable said: “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. The group will convene shortly to discuss the judgment.”
Mike Emmott, Employee Relations Adviser at the CIPD, said: “Today’s ruling on holiday pay leaves much to be resolved – particularly on the issue of backdating. Employees who may have been hoping for an instant bonanza would be wise not to count their chickens before they’re hatched.
“The ruling means that employers will have to change how they calculate holiday pay in future to take account of voluntary overtime. However it does seem to have limited the scope for substantive retrospective claims, which was the biggest concern in terms of possible costs for employers.
“Employers face considerable ongoing uncertainty because the judgement is likely to be appealed, which is not good for business or jobs. The UK government and employers have been acting in good faith in implementing the terms of the Working Time Directive over how holiday pay is calculated and it is disappointing the scope for ambiguity was not identified at a much earlier stage.”
Claire-Jane Nicol, Partner at law firm Bond Dickinson says: “This employment tribunal ruling has a significant impact on employers across the UK. They will need to review the basis on which they calculate holiday pay to include elements that have previously been disregarded – not just overtime, but also allowances, shift premiums and the like.”
“The cost implications for those with large workforces and who regularly depend on overtime are significant. Businesses that are traditionally busy at Christmas time and who depend on overtime need to review their practises now.”
“Some employers are saying that the impact on the wage bill could put their businesses at risk; others are looking now at how they can cut costs or change working practises to meet the additional liability.”
Matthew Sanders, CEO of Brookfield Rose Group commented: “I expect in the first instance that the decision of the ruling will be appealed. After which, even if the appeal is unfavourable for business the impact could still be many years off. I am keen to understand more behind the decision made as it is currently not a contractual right to receive overtime and therefore not holiday pay for overtime.
“The implication of this ruling is considerable and if a further decision was made to backdate the payments the financial impact on businesses could run into billions. On top of the actual payments the financial and administrative costs of administering this ruling would be massive, incredibly expensive and logistically challenging.”
Christopher Fisher, employment partner at international law firm Mayer Brown: “Today’s EAT’s judgment on holiday pay is not surprising, based on the recent trend of cases. The court has confirmed that EU law requires overtime payments to be included in the 4 week element of statutory holiday pay.
“However, the proactive approach the Court has taken to interpreting domestic law in light of EU law will again raise some eyebrows. The need for legal certainty held little weight with the EAT and it was content to insert language into the current domestic legislation. This type of approach, which is now becoming more commonplace, means employers can be caught out even when they are abiding by the exact wording of domestic legalisation.
“It is not all bad news for employers though. Employers had feared claims for back-pay going back several years but the court has reduced this possibility by disallowing claims where there has been a 3 month gap between underpayments.
“In practice this should mean most retrospective claims for underpayment of holiday pay should cover only the most recent holiday year, if at all. On this element of the decision however, permission has been given to appeal to the Court of Appeal and so we may not have heard the last on this issue.”
All the unions came out firmly in favour of the ruling:
TUC General Secretary Frances O’Grady 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. It’s worth remembering that in 1999 a change in the law meant that six million people gained more holiday entitlements, and businesses easily absorbed the increase and employment continued to rise.”
Paul Kenny, GMB General Secretary, said: “This judgment ensures that workers are properly paid for holidays and is a good and welcome result. This judgment clarifies that voluntary overtime and time spent waiting for emergency call outs must be included in holiday pay calculations.
“Members who did not get the same pay during holiday as during the rest of the year should contact GMB to be advises of their rights and to have their claims assessed and taken forward.
“GMB look forward to a sensible discussion with employers who need to have a rethink about the way holiday pay is dealt with.
“No doubt certain elements and interest will condemn the European Directive upon which this court decision is based that will give workers in the UK the extra pay they have been denied by UK employers and politicians for years.”
Unite executive director for legal, membership and affiliated services Howard Beckett said: “Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to. This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order.
“Employers will now have to include overtime in calculating holiday pay, and those that don’t should be under no illusion that Unite will fight to ensure that our members receive their full entitlement.
“Once again Unite legal services is leading the challenge to employers and demonstrating to all workers that to receive justice in the workplace you must be in a trade union.”