4 November 2014

Earlier this week we reported a warning from the Institute of Directors (IoD) that a forthcoming ruling by the Employment Appeal Tribunal (EAT) could have a disastrous effect on small businesses.

The EAT has made its decision and, as the IoD predicted, the business community is far from happy.

Ruling with regard to Bear Scotland v Fulton (and associated cases) the EAT has said that employers need to include overtime pay when calculating workers' holiday pay.

The British Chambers of Commerce (BCC) immediately repeated the IoD claim that this would put firms at risk of incurring significant financial losses, "which could force them to close their doors altogether".

John Cridland, CBI Director-General, made a similar point, saying: "This is a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds — and not all will survive, which could mean significant job losses."

However, three points need to be borne in mind before total panic sets in.

First, the feared backdating of claims to the 1990s seems unlikely as the EAT said that claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments.

Second, the ruling seems likely to be referred to the Court of Appeal.

And finally, Business Secretary Vince Cable has already announced that he is setting up a taskforce to assess the possible impact of the ruling.

The taskforce will consist of "a selection of government departments and business representative groups" (no trade unions) and will, the Department for Business, Innovation and Skills' press release said, "provide a forum to discuss how the impact on business can be limited".

From Paul Clarke, business writer for Croner