Where next on holiday pay?

IN: Business news

Recently the Employment Appeal Tribunal (EAT) delivered a ruling (the Bear Scotland case) which, together with other rulings (including from the European Court of Justice), re-write the holiday pay calculation rules long enshrined in UK law since the Working Time Regulations came into force, in 1998. In a nutshell, under the new approach, pay for holidays should include more elements of variable pay than before, where the variable element is intrinsically linked to the employee’s work.

undefinedThe 2015 survey shows 37% of manufacturers expecting another year of improvement in the UK economy, with 17% expressing the view that deterioration in the outlook is more likely. Whilst this shows some difference from the 2014 survey, respondents remain more positive on the UK’s economic outlook going into 2015 than in either 2012 or 2013. Overall, seven in ten manufacturers in the survey see the UK as a competitive location for their activities in 2015.

Many manufacturing employers are significantly affected by the ruling - two thirds (68%) estimate the change will add more than 3% to their current pay roll costs. They are now focused on ensuring compliance for the future and considering their strategy on dealing with any back pay liability. 

On future compliance, the law is now clearer about what falls in the calculation and what is outside but there are still question marks over significant pay elements, such as commission. This makes future compliance practically difficult to achieve and to cost. Government must therefore take urgent steps to make key aspects of the law clearer, more flexible and more workable.

Employees affected by the ruling can bring claims for back pay, although only to a limited extent.  The EAT ruled that, if there is a 3-month gap between past underpayments for Euroleave, claims cannot be made for underpayments before that gap. Each employee can therefore only claim underpayments up to the most recent 3-month gap. However, the extent to which this limitation benefits an employer depends on the actual pattern of holidays taken by its employees.  Employers are, therefore, pleased that the Government has taken immediate action to put in place a “back stop on back pay” to buttress the ruling, although it does not come into force until 1 July 2015.



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