Employment Appeal Tribunal – Holiday Pay Ruling January 2015
In a recent decision by the Employment Appeal Tribunal (EAT) in relation to holiday pay, the EAT concluded that when calculating Holiday pay, overtime and bonuses must be included in any calculation to comply with the EU Working Time Directive (WTD). This is of particular concern for Dental practices where it is a habitual practice for them to pay staff overtime and bonuses.
The EAT decided that overtime payments were considered part of the performance of the tasks required under an employee’s contract and must be taken into account when calculating holiday pay under the WTD. However this only apply to situations of compulsory overtime and the position in relation to voluntary overtime is unclear. Such considerations also apply to such aspects of an employee’s pay such as bonuses and commission which should be considered part of an employee’s normal pay.
There was the possibility of holiday pay underpayments being backdated as far back as 1998 (when the WTD came into force) or the start of their employment if later. However, the EAT decided that claims alleging underpayment of holiday pay will be time barred if there was a break of at least three months between successive underpayments. A gap of more than three months means there can be no series of deductions from holiday pay, so tribunals will not have jurisdiction to hear such claims.
Practices should consider their current arrangements with staff and establish the risk to potential claims. Practices may wish to set aside a reserve fund in their accounts to offset any potential associated claims in relation to holiday pay or for backdated pay. Practices may wish to consider changing the working practices or holiday pay structure. The good news for practices is that they are only open to backdated claims of up to three months if the “gap rule” applies.
It is important to note that the decision could be referred to the Court of Appeal meaning a final decision on the matter could be some time away and may yet change.
The writer Andrew Lockhart-Mirams is the Senior Partner at Lockharts Solicitors and can be contacted directly at alm@lockharts.co.uk. All general dental law enquiries should be directed to csd@lockharts.co.uk. Alternatively, please contact us on 0207 383 7111 or by visiting our website www.lockharts.co.uk
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