Holiday pay headaches in the offing for EU businesses

Following recent judgement from the Employment Appeals Tribunal on holiday pay, Donald MacKinnon of Glasgow based Law at Work, looks at the implications for EU businesses.

Businesses are potentially facing a multibillion-pound bill as an Employment Appeal Tribunal this week ruled overtime should be taken into account when holiday pay is calculated.

Holiday pay is an issue that impacts every business and many employers will now face a whole-sale rethink of how they pay their employees and calculate costs.

With the decision going in favour of the employees, it means that employers will have to change their method of paying workers for their holidays. At present, holidays are generally based on basic pay i.e. not including commission, overtime or allowance.

The judgement rules that these payments should now be included in holiday pay and this will have a significant impact on every business.

It is estimated that one in six employees works regular paid overtime. Employers may now have to include these payments when calculating holidays which could amount to substantial amounts of money for many employers.

However, the government is urgently looking at this and may seek to limit employers' liability for back pay.

The union Unite, which has a membership of 1.4 million, is preparing to help their members launch claims against employers to claim for holiday pay owed.

Employers therefore need to take this new judgement seriously. The case could lead to a flood of claims that would see employers hit with huge bills, potentially leading to some bankruptcies in the UK.

Are you an employer or employee affected by the EU ruling on holiday pay?