19 December 2014

Immediately after last month's Employment Appeal Tribunal decision with regard to including overtime pay when calculating workers' holiday pay, the Government promised that a taskforce would assess the impact of the ruling on businesses.

This week it has taken action to reduce potential costs to employers and, it went on, to give certainty to workers on their rights.

What this means in practice is a change to regulations under the Employment Rights Act 1996 which will mean that claims to Employment Tribunals on this issue cannot stretch back further than two years.

Workers can still make claims under the existing arrangements for the next six months, which will act as a transition period before the new rules come into force, the Department for Business, Innovation and Skills (BIS) said.

The changes therefore apply to claims made on or after 1 July 2015.

The taskforce continues to work through the implications of the ruling, BIS confirmed. Its membership includes the CBI, EEF, Federation of Small Businesses, Institute of Directors and British Chambers of Commerce (BCC).

Perhaps not surprisingly, the TUC is unhappy about the announcement, accusing the Government of attempting to water down the ruling.

"Failing to count overtime when calculating holiday pay is quite simply wrong," General Secretary Frances O'Grady said. "The November ruling was a victory for hard-working people who deserve to be properly paid when they take their well-earned leave."

At the moment, she continued, the law on back pay mirrors the rules on commercial debt, which can be pursued for six years in most of the UK.

"Today’s announcement smacks of treating workers as second class citizens," Ms O'Grady concluded, "treating commercial debt more favourably than wages."

From Paul Clarke, business writer for Croner