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Updates from the Clayton & Brewill team.

Overtime to be included in holiday pay calculations

4th November, 2014

The Employment Appeal Tribunal (EAT) handed out a surprise decision today (04 November), when it ruled that overtime should be included in employees’ holiday pay, as Clayton & Brewill’s head of Payroll Services, Chloe Hughes explains..

In the case, Bear Scotland v Fulton (and other parties), the EAT found in favour of the workers in deciding that employers will now have to include overtime as well as basic pay when calculating employees' holiday pay entitlements. Employers will need to calculate an employee’s ‘normal remuneration’ when calculating their holiday pay – and this ‘normal remuneration’ will include any overtime payments made.

This is being described as a bombshell ruling and businesses need to consider how they operate in relation to overtime and holiday pay going forward as this could have a serious impact on their operating costs.

The Tribunal also ruled that some backdated claims will be allowed meaning that the figures could run into millions of pounds – with businesses in sectors that rely heavily on overtime workers being hit the hardest.

Whilst an appeal may be launched, we recommend that employers consider putting money aside for potential claims and also take time to review existing policies on overtime.

For help or advice on this or any other payroll related matter, contact Chloe on 0115 950 3044 or by email.


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