The Employment Appeal Tribunal (EAT) has ruled overtime needs to be accounted for when payroll departments are calculating employee holiday pay.
Despite the full impact of the decision still being unclear, a poll by Sage UK reported two-thirds of businesses disagree with the ruling and 10% of businesses will look at restricting employee overtime in the future.
Holiday pay was previously calculated using normal working hours. The new ruling means that under Working Time Regulations, compulsory overtime needs to be included (using the 12-week period) before the leave is taken so the entitlement can be calculated.
Businesses facing new challenges
The EAT announcement may start to have a significant impact on payroll teams, with staff spending longer calculating holiday pay entitlements of increasing complexity.
It was suggested over the last 15 years, too many employees had previously been underpaid in regards to holiday pay, and that employers should immediately start to review their holiday pay procedures in line with the new legislation.
Smaller firms may be greatly affected, especially those who are without the resources of larger businesses who should be equipped to make internal adjustments.
Resources may also be stretched across the board. Cash flow changes could also result in businesses having to plan ahead to ensure they don’t get caught out.
Recruitment through Portfolio CBR
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We can assist you when it comes to hiring the perfect candidate. For assistance please contact us or call our team for advice on 020 7650 3190.