Over the summer the Employment Appeal Tribunal has deliberating. It has now decided that required overtime will need to be included in holiday pay calculations in the future. Back pay for up to a year, it is suggested, will need to be provided.
But employers would be wise to take matters slowly.
In the first place the decision may well be appealed to the European Court of Justice (ECJ). Any decision by the ECJ is unlikely to be different. It was, after all the ECJ that set the ball rolling with a decision on commission and holiday pay. Nonetheless if the decision is appealed then this may justify holding back-payments off for now. In the meantime provision for such payments might be calculated and cash accumulated in order to pay it later.
Secondly the detail of the decision is not yet available but the word “required” has been used in respect of overtime. While overtime generally is “required” sometimes it is only “expected” and this could prove to be a valuable distinction. Other detail, as to how exactly how far back pay needs to be calculated is not yet fully clear. It is also not yet clear how the reference period should be determined if “required” overtime is at a fluctuating level.
Thirdly the decision relates to only the four weeks leave provided for in the Working Time Directive. Employers may like to make the distinction and include overtime in the first four weeks of annual leave and ignore it in calculating any additional leave, such as the 1.6 weeks provided under different legislation.
Unite has vowed to fight to ensure its members get their full entitlement. An attempt perhaps to gain members. But others, such as the EEF and the CBI have warned that small firms could be put out of business and there are likely to be job losses as a result.
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