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Employers in the UK may have been miscalculating holiday pay for their staff for years and could be hit with massive bills for back pay. Leading Midlands law firm, George Green LLP is offering to carry out a free risk assessment for employers who are worried about the potential impact on their businesses.
Tim Lang, George Green’s employment law partner explains “Under the European Working Time Directive, workers are entitled to 4 weeks’ paid leave per year. There is however no guidance in the Directive as to how that holiday pay should be calculated. In the UK the Directive is implemented as the Working Time Regulations. These Regulations give workers more holiday at 5.6 weeks’ paid leave and say that holiday pay should be paid at a worker’s basic rate – without the addition of voluntary overtime or commission. “
Mr Lang continued “The Employment Appeal Tribunal will shortly be delivering it’s decision in two cases – Wood v Hertel UK and Fulton v Bear Scotland - which may mean that UK business face claims for unpaid holiday pay. The case concerns the question of whether an employer should take a worker's overtime payments into account when calculating their holiday pay in respect of the minimum four weeks' annual leave. The decision in these cases and another case looking at commission payments are likely to have a significant impact. Commentators consider the cases are likely to be successful. In the worst case scenario employers could face claims backdated to 1998 when the Working Time Regulations came into effect.”
“Employers are advised to assess their historical exposure and the potential financial impact. Having acted in accordance with UK law they now face a significant change to the interpretation of that law which could shake their business in the same way that PPI claims affected the financial industry. Repercussions are likely to affect future pay awards, employment levels and even whether some businesses can continue”