Overtime and holiday pay

In a landmark Employment Appeal Tribunal a group of workers has won a case over whether they were entitled to receive overtime payments as part of their standard holiday pay, which has sent repercussions through businesses and led to the establishment of a government working group within hours of the ruling say Harris & Co accountants Northampton #accountantsnorthampton

The ruling in Bear Scotland v Fulton and Others UKEATS/0047/13/BI means that UK employers now need to include overtime pay when calculating workers’ holiday pay.

The case was brought against engineering companies, Amec and Hertel, by workers represented by the Unite union. The ruling could lead to pay outs worth thousands of pounds and raises questions about the future of overtime as part of regular work contracts.

The 16 Unite members, a mix of electricians, scaffolders and semi-skilled operatives, worked on a project at the West Burton power station site in Nottinghamshire until it came to an end in 2012.

Unite said that ‘during that time they were consistently required to work overtime and received payments for travel time. Payments for that work were not included in holiday pay, meaning that the workers received considerably less pay when on holiday, compared to when they were working’.

The decision follows a long-running case over whether employees should be given the right to take separate holiday if they are taken ill while they are on annual leave. This decision went to the European court [C-78/11 ECJ], which ruled that sick leave should be excluded from the normal contracted holiday allowance when employees were taken sick over the period. However, this was linked to statutory holiday of four weeks as iterated in the EU Working Time Directive.

Unite executive director for legal, membership and affiliated services, Howard Beckett, said:

‘Up until now some workers who are required to do overtime 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.’

‘Employers will now have to include overtime in calculating holiday pay, and those that don’t should be under no illusion that Unite will fight to ensure that our members receive their full entitlement.’

The case can still go to the Court of Appeal and technically could be pursued on to the European Court of Justice (ECJ).

The government has already announced that it will set up a taskforce to review the impact of the ruling. It will consist of a selection of government departments and business groups including the CBI, Federation of Small Businesses, Institute of Directors and British Retail Consortium among others. They have been briefed to come up with proposals to minimise the impact on business.

Business Secretary Vince Cable said:

‘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 taskforce of representatives from government and business to discuss how we can limit the impact on business. The group will convene shortly to discuss the judgment.’

The main accounting body, the ICAEW, was critical of the decision. Stephen Ibbotson, director of business at ICAEW, said:

‘So many businesses that have struggled to survive during the recession and increase headcount will now find that their costs could increase at a stroke, and the increased regulation from the Working Time Directive will not help them along the way.’

‘There are many questions still to answer – just what exactly constitutes regular overtime? What does this mean for commission-based salaries? We’re at the beginning of a long road of appeals and counter-appeals, which only adds to uncertainty – but in the meantime employers will need to ensure that they make provisions for the increased costs that will undoubtedly occur.’

Any employers and workers who may be affected by the ruling should contact the Acas helpline for free and confidential advice.