Overtime and holiday pay - do you currently consider overtime when processing holiday pay? Earlier this week the Employment Appeal Tribunal handed down the decision in the case of Bear Scotland Ltd v Fulton and found that employees' holiday pay may now need to be calculated to include any overtime.
Before this ruling, voluntary overtime was not typically included when calculating a workers' rate of holiday pay. This judgement has clarified that workers should have voluntary and compulsory overtime taken into account when they are being paid annual leave.
Anybody making a claim must have an underpayment for holiday pay that has taken place within 3 months of lodging an Employment Tribunal claim. Therefore in order to submit a claim to the Employment Tribunal at this stage, the underpayment must have occurred from the start of August forward.
However, if the claim involved a series of underpayments, any claims for the earlier payments will fail if there has been a break of more than 3 months between such underpayments.
This judgement is one of the biggest and potentially most controversial decisions for employers this year. While the case is likely to be appealed to the Court of Appeal, the impact of the case will be felt now for employers and it is advisable that employers start including overtime payment as part of any annual leave pay going forward.
Regardless of the decision of the Court of Appeal, if employers start to pay their employees holiday pay inclusive of overtime, and then decide to change their policy on this on the basis of a Court of Appeal decision, they could potentially be vulnerable to breach of contract claims from their employee if they decide to change this back.
After the ruling, Business Secretary Vince Cable said he would be setting up a task force to assess the impact of the ruling and said that, "The 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 task force of representatives from government and business to discuss how we can limit the impact on business."
