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Overtime and holiday pay

Overtime and holiday pay

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On the back of today's ECJ judgement I'm just curious about how many this is going to affect?

I'm fairly certain it will affect us (we pay a non-contractual flat rate call-out fee) but it seems to me the BBC are making it read worse for employers than it actually is once you read the judgement.  But after reading the judgement I still don't feel confident in whether it applies to our situation and still feel that I need further clarification. 

What are your thoughts?

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By Mojomarm
04th Nov 2014 13:00

Our firm will be affected as we're in the Manufacturing Industry and most of the employees work voluntary overtime so the cost of this ruling may be significant.

The problem is as the ruling is only a couple of hours old, I'm struggling to find any concrete information as to how this adjusted holiday pay should be calculated, and therefore the financial implications on how it will affect our firm.  I know that the backdated claims can only go back 3 months but after that ...... it all seems very sketchy. 

How is the average overtime calculated?  Is it for the overtime worked in the period being paid? Is it the average over the year? Is it the average over the past 3 months?  Is it the average over the past 17 weeks (in line with Working Time Directive stating no more than 48hours per week should be worked unless employee opts-out?). Are salaried employees that we don't pay overtime to normally entitled to this or not?!

And when this is applicable from?  Given there's a chance that this ruling may be appealed, am I meant to adjust the holiday pay in the payroll run I'm due to start tomorrow?! And again, what rates am I using?!

Trying to calculate how this will impact on our firm is impossible given the unknowns. We may have to look at potentially capping overtime to prevent costs rising too high, which is far from ideal given our order book is starting to increase after the problems with the economy for the past 5/6 years.

The whole thing is looking like an administrative nightmare, which will make the monthly payroll run even more tedious given the extra work due from pension auto-enrolment.

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Euan's picture
By Euan MacLennan
04th Nov 2014 13:16

ECJ judgement?

I thought this was a decision by the Employment Appeal Tribunal in the UK.  I had no idea that it was a European ruling.

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By DMGbus
04th Nov 2014 13:30

Yes, it's the interfering EU / EC again!

Here's what FSB said last week (bad form - very short notice):

Do you pay a salary plus overtime/commission to your employees?  This could have a damaging effect on your business. We urgently need case studies from members who pay a salary plus overtime and/or commission to their employees ahead of a European Court of Justice hearing which will look at employees being granted the right to overtime/commission whilst on holiday and this could be backdated.  Please read on..... There have been rulings from the European Court of Justice (CJEU) on the relationship between annual leave and voluntary overtime, commission and shift payments. The ECJ has said that holiday pay (on the EU portion of leave only i.e. 4 weeks) must take other payments into account, so an employee is no worse off for going on holiday.  The UK must give effect to the CJEU decisions and therefore it is likely that some elements of overtime and commission will need to be factored into holiday pay in the future. There is a decision expected from an appeal tribunal imminently. There is a possibility that UK firms will receive huge backdated claims - potentially up to 6 or 16 years.  We urgently need:Businesses owners who have employees who's earning are boosted by a significant amount of overtime or commission who are happy to talk on camera and on the record. These employers should be happy to talk about how worried they are that the ruling will be backdated and how these changes could affect how they manage and motivate staff. Relevant industries include, for example; recruitment, sales, estate agents, hair and beauty salons and any other industry which pay in this manner.    If a decision of this nature would have a seriously detrimental effect on your business and you would be happy to discuss this, please [email] with your name, contact details and the industry you are involved with by end of business Friday 31 October 2014 (tomorrow)

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By Gem7321
04th Nov 2014 13:42

My apologies it is EAT but likely to be referred to ECJ. 


I agree Mojomarm I feel there is not enough information to be able to put this in to practice. However I think that they have said the previous 12 weeks should be used to calculate average earnings for holiday pay but I may be misinterpreting this! 

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