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Overtime to be included in employee holiday pay

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The Employment Appeal Tribunal has ruled today that overtime should be taken into account when holiday pay is calculated. This will mean that any person working voluntary overtime could be able to claim for additional holiday pay rather than just the basic holiday pay received.


The government has estimated that 1in6 of the 30.8 million people in work at present get paid overtime which could see businesses stand to lose billions of pounds if claims can be backdated.


The Federation of Small Businesses estimates the ruling could impact around 400,000 firms in the UK with the biggest threat belonging to the backdated claims which could see some businesses unable to cope and will inevitably have to close. Having to factor in additional costs could also see a high number of job cuts across UK firms.


A spokesperson for the Department of Business, Innovation and Skills says: “We do not believe voluntary overtime should be included in holiday pay and are concerned about the potential impact on employers.”


Two cases were taken to the Employment Appeal Tribunal recently with regards to the Working Time Directive. The employees for these companies claimed their holiday pay was less than it should have been because their voluntary overtime was not factored into their claim. The both sets of employees won their case.


Unite Union executive director for legal, membership and affiliated services, Howard Beckett says: “Up until now some workers who are required to do over time 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.”


Given the financial implications involved with this ruling, it is anticipated that there will be an appeal either to the Court of Appeal or it will be referred to the EU courts in Luxembourg for clarification on how the European law should be interpreted.


Going forward due to the extra costs involved many employers may now look to reduce the amount of overtime availability.

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