Paid holiday to include overtime: new law imposes cost on businesses
The Employment Appeal Tribunal has today issued a decision that has widespread and expensive implications for all companies paying overtime to their staff.
It has been decided that the law requires overtime to be included in holiday pay. This means all people working voluntary overtime could claim for additional holiday pay. Currently, only basic pay counts when calculating holiday pay. The coalition and business groups had argued strongly that overtime should not be included in holiday pay calculations, but the Tribunal disagreed with them.
The government estimates that one-sixth of the 30.8 million people in work get paid overtime. This means around five million workers could be entitled to more holiday pay. If claims can be backdated, businesses stand to lose billions of pounds, some estimates suggest.
The details of the ruling, particularly on whether claims can be backdated, have yet to be released. The ruling could be appealed to the Court of Appeal, meaning a final decision may be years away.
Meanwhile, businesses may need to reserve funds to cover the additional costs, past present and future, in case the judgement is not over-turned.