Holiday pay ruling could be a bombshell for Midlands businesses

By Crowe UK LLP
schedule5th Nov 14
Midlands manufacturers could be affected by the Employment Appeal Tribunal’s (EAT) decision that overtime must be included in holiday pay, according to Crowe Clark Whitehill’s national head of manufacturing. Johnathan Dudley, managing partner of the Midlands office of national audit, tax and advisory firm, said: “It is likely that this decision will affect all manufacturers, especially if the decision is significantly backdated as has been implied. “If there is to be significant backdating, then the decision will almost certainly be appealed, causing uncertainty for what could be several years... Any uncertainty could cause difficultly for accountants and auditors alike and could also affect corporate finance and funding transactions. The ground-breaking decision means that all people working voluntary overtime could claim for additional holiday pay. At present, when calculating holiday pay only basic pay is taken into account. Mr Dudley said the ruling had widespread implications for all companies paying overtime, or indeed other additional payments such as commission, to their staff. The CBI has already called for the decision to be appealed. Mr Dudley said: “The Government and business groups had lobbied against overtime being included in holiday pay calculations as this could cost UK companies billions. “It’s not clear yet whether claims can be backdated, which could significantly justify that concern and even threaten the solvency of some businesses. Some may not survive, which could mean significant job losses. “But in any event, business owners will need to consider and implement current procedures to adjust holiday pay to include elements such as overtime,” he said. The case centres on how the UK has implemented the EU-wide Working Time Directive and in particular the Working Time Regulations since 1998. “If the EAT decision today is ultimately upheld, it would suggest that the UK has been interpreting these EU directives incorrectly,” said Mr Dudley.