The recent decision that overtime is to be taken into account when calculating holiday pay will affect every business which employs staff within the UK.
This area of law is likely to be a minefield over the coming months. Although Unite have indicated that they will not be taking the case to the Court of Appeal on behalf of the employees in Bear Scotland v Fulton it is likely that the employer’s side will, and at some point an employee in another case is almost certain to challenge the Fulton judgment’s limit on backdated claims.
What does the judgment mean to my business?
Basically, the judgment says that when calculating holiday pay employers need to include ‘non-guaranteed’ overtime but only when employees are regularly required to work overtime, as opposed to ‘occasional overtime’ which is unlikely to have to be included in holiday pay calculations.
What about commission?
There is also a separate case coming back before an employment tribunal early next year having already been referred to the European Court of Justice on the closely related question of how holiday pay should be calculated in respect of commission. Both will naturally involve additional argument as to how exactly you should now calculate holiday pay in light of Mr Justice Langstaff’s judgment in Fulton.
How far back can the employee claim?
The good thing about the judgment in Fulton is that it was a significant victory for employers in respect of limiting the scope of historic claims. Basically, the judgment says that if there is a gap of more than three months during which time there is no underpayment of holiday pay then an employee cannot argue that a further underpayment forms part of the same series of deductions. This could allow employers to limit their liability by arguing that parts of many claims for back pay are out of time.
There are steps that can be taken to mitigate against any potential softening of the limitation on historic claims; however, as this ruling will affect each employer differently it is important to consider the particular circumstances of the workforce and employment contracts before deciding firstly how to deal with the issue in the immediate future in respect of pay going forward, and secondly what steps might be appropriate to guard against the risk of backdated claims.
For a free no obligation discussion with our recommended employment solicitors you are welcome to contact Paul Bownes at Ellis Hass & Co Solicitors in Solihull either by email ([email protected]) or telephone (0121 709 1918). Their offices are located at 6 The Courtyard, 707 Warwick Road Solihull B91 3DA.