Firms face massive holiday pay bill after legal case

A landmark employment tribunal ruling on holiday pay could hit construction firms with massive holiday pay bills.

Today the Employment Appeals Tribunal ruled that non-guaranteed overtime must be taken into account for the purpose of calculating holiday pay.

The decision, the result of a case brought by union Unite, could lead to pay outs of thousands of pounds for workers at contractor Amec and services firm Hertel at the centre of the case.

However, it also paves the way for similar claims for holiday pay at other firms.

The 16 workers that brought the case, who included electricians and scaffolders, were required to work overtime as part of their job, but this was not taken into account when they were paid holiday pay.

This meant they ended up with significantly less money when they were on paid holiday than when they were at work.

This week’s ruling means this is now no longer allowed and some workers will be entitled to back pay, meaning contractors could face a huge retrospective holiday pay costs.

The Department for Business Innovation and Skills (BIS) said it had urgently convened a taskforce of seven industry bodies to discuss how to limit the impact on businesses.

Business secretary Vince Cable said the government would “review the judgment in detail as a matter of urgency”.

Alasdair Reisner, chief executive of the Civil Engineering Contractors Association (CECA), said contractors were “rightly worried” about the impact of the decision, which could “significantly increase costs for contractors, punishing them for working to a payment model that has previously been accepted as normal and correct practice”.

He added: “Having raised our concerns with BIS earlier this year we welcomed its formal intervention as part of the appeal, challenging proposals that any claims could be retrospective.

“Our initial reading of the judgement suggests that this intervention has been noted, with apparent limits on retrospective claims.

“However, it is important that all aspects of the judgement are considered.”