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Legal ruling puts dramatic new cost on holidays

Updated on 30 September 2015, 1027 views

Tuesday’s ruling in the Employment Appeal Tribunal has confirmed that holiday pay should include overtime pay, even if undertaken voluntarily. This overturns the UK’s previous interpretation of the law in 1998 which stated that only ‘basic rate’ pay should be used for the calculation of holiday pay.
The EAT ruling relates to the case of Bear Scotland v Fulton (and conjoined cases) and creates widespread implications for Practices who pay overtime to their staff.
What is not clear from the EAT ruling is whether UK businesses will be liable for backdated holiday pay claims brought by workers. If UK businesses are indeed liable then this is likely to open the floodgates for approximately 5 million workers to bring claims for more holiday pay. This is likely to have a far-reaching financial impact on UK business. In view of this, the Federation of Small Business has urged the government to bring in emergency legislation to prevent any possibility of backdated claims.

In response, the Government has spoken out against the ruling and has commissioned a “task force” to look at the entire issue. Its makeup is entirely from the employer sector, so there can be little doubt as to its recommendations.
Given the financial implications for business it is also likely that the ruling will be appealed. A final decision could be years away so uncertainty is likely to prevail.
Employers should be aware that a failure to follow the EAT ruling may result in unlawful deduction from wages claims and/or breach of contract claims by workers.

Affected Practices may therefore wish to rethink how they calculate workers pay and/or reduce the availability of overtime. If you decide to do nothing be aware that there may ultimately be a liability for which a financial contingency should be made.

For more information on this developing story, why not attend one of Porter Dodson’s seminars dedicated to the topic on Thursday 20th November in Yeovil or Wednesday 26th November in Taunton? Registration and breakfast will be from 7.30am and the seminar will start at 8.00am. Please contact Paula Whitehead at for more information.

If you require advice and are unable to attend one of these seminars, please feel free to contact Adrian Poole, Partner and Head of Employment at Porter Dodson on 01935 846802 who will be happy to provide further guidance.