Thousands of businesses are facing additional costs after a tribunal ruled that overtime should be included in holiday pay calculations.
A recent Employment Appeal Tribunal (EAT) ruled that employers must factor in overtime when calculating holiday pay, instead of only taking basic pay into account. The tribunal also said that employees could make backdated claims if it has been less than 3 months since their last holiday.
Following the decision, the government announced that it had set up a task force to examine the potential impact on businesses. Business Secretary Vince Cable said the government would “review the judgement in detail as a matter of urgency”.
Business community reaction John Cridland, director general of the Confederation of British Industry, warned that the ruling could result in job losses: “This is a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds -and not all will survive.”
Adam Marshall, at the British Chambers of Commerce, said that backdated claims could pose the biggest problem for businesses: “What businesses fear most is that these judgements will open the door to backdated claims, which could run into many millions. Firms which have complied with existing regulations are shocked by the thought of having to back-pay holiday
entitlements – a change they could not have predicted.”
Whilst the rules are currently subject to some debate nationally, the impact of new accounting regulations from January 2015 together with the Tribunal ruling places a significant amount of doubt over the correct accounting treatment of holiday pay, as well as uncertainty for employers. For details on how this will affect you and your company contact out team of experts on 0845 177 5500 or using our on line form.