Overtime and holiday pay - the end of the road?

On 4 November the long-awaited decision of the Employment Appeal Tribunal in the case of Bear Scotland v Fulton & Others was released.

The Tribunal had to decide whether non-guaranteed overtime (that is, overtime which the employer does not have to offer, but the employee must work if offered) should be included when calculating holiday pay. The question rested on whether such overtime was "intrinsically linked" to their performance and remuneration, as described in 2012 by the European Court of Justice in the case of British Airways v Williams. The EAT's answer was that yes, it was intrinsically linked, and should be included. By way of contrast, items such as expenses are not intrinsically linked.

The howls of pain that greeted this decision are understandable. It means that any employer who bases holiday pay purely on basic pay may have to update those calculations and install complicated systems to keep track of each individual's pay over each 12-week period.

But some comfort can be drawn from the fact that the EAT severely restricted any backdating exercise. There were fears that claims for back pay may run all the way back to 1998. The EAT has restricted it to a maximum of 3 months.

Companies will no doubt find employee representatives knocking on their doors over the coming weeks wanting to open negotiations. What should members' response be?

Firstly, point out to the Union that this decision may well be appealed, possibly all the way up to Europe, in which case any final decision on the matter is probably years away. Secondly, bear in mind that this decision only relates to the 20 days holiday covered by the Working Time Directive. Any holidays above that can be treated as normal. And perhaps contact your local BOSS HR Adviser for continued support on this issue.

Whilst waiting to see the outcome of any appeal, members may want to review current overtime rates - could you reduce the amount of overtime done? And initiate a general audit on holiday pay levels, as well as calculate the effect of having to include voluntary overtime in the future. After all, forewarned is forearmed.

Michael Gardner

Chief Executive - BOSS Federation

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