Contractors could face a bill running into millions after today’s Employment Appeals Tribunal decision on holiday pay and overtime.
It ruled that non-guaranteed overtime must be taken into account for the purpose of calculating holiday pay.
The judgement follows three cases, one of them – Bear Scotland Ltd v Fulton – involving three roads maintenance workers who claimed voluntary overtime pay should have been factored into their holiday pay. The others were Hertel (UK) Ltd v Wood and others, and Amec Group Ltd v Law and others.
Today’s judgement, which affects all three cases, could significantly increase costs for contractors.
The Civil Engineering Contractors Association (CECA) warned that its members would be “punished for working to a payment model that has previously been accepted as normal and correct practice”.
In response to the judgement, the Department for Business, Innovation and Skills has created a task group that will examine the decision and consider how affected businesses can be supported, minimising the impact on industry. CECA is one of seven bodies who will be represented on this group.
CECA chief executive Alasdair Reisner said: “Contractors will rightly be worried about the potential impact that today’s decision on their businesses. Having raised our concerns with the Department for Business, Innovation and Skills earlier this year we welcomed its formal intervention as part of the appeal, challenging proposals that any claims could be retrospective. Our initial reading of the judgement suggests that this intervention has been noted, with apparent limits on retrospective claims.”
“However, it is important that all aspects of the judgement are considered. We will now work with the Government to ensure that both employers and employees are treated sensibly and fairly as a result of today’s decision.”