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Government Tackles Business Concerns over Holiday Pay

Dec 23, 2014

The government has this week taken action to reduce potential costs to employers and give certainty to workers on their rights following the recent court decisions on holiday pay.

Last month the Employment Appeal Tribunal ruled that holiday pay should reflect non-guaranteed overtime.

The EAT has delivered a landmark decision in relation to the way that statutory holiday pay is to be calculated in order to comply with the Working Time Directive. The EAT held that payments for overtime which a worker is required to work but which an employer is not required to offer (non-guaranteed overtime) is "normal remuneration" for the purposes of the Working Time Regulations 1998 must be interpreted to achieve this. This means that non-guaranteed overtime should be taken into account when calculating holiday pay for the purposes of the minimum four weeks' statutory annual leave.

The government recognises the decision of the court and is now taking action to protect UK business from the potentially damaging impact of large backdated claims. The new EAT decision will mean that these types of claim to Employment Tribunals will be able to be backdated for up to two years.

Workers can still make claims under the existing arrangements for the next six months which will act as a transition period before the new rules come into force. The changes apply to claims made on or after 1 July 2015.

Following the recent Employment Appeal Tribunal ruling, the government has set up a group of representatives in order to best assess the new financial exposure which businesses may face and the best method to limit the impact of the EAT ruling on businesses.  The taskforce will consist of government departments and seven business representative groups including the CBI, EEF and the Institute of Directors.

Employers will need to review their staff's working arrangements to assess whether they have workers who regularly work non-guaranteed overtime or are paid allowances which are more than simply expenses.

If you have any queries regarding the impact of the EATs decision on your business, please contact a member of the Employment Team on 01279 755777.

Darren Hayward

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Darren Hayward

Darren joined Nockolds in 2003 and is the firm’s Managing Partner and Partner in charge of our Employment Law Team. 
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