UK employers may have to pay billions of pounds more in wages after a London tribunal ruling that business groups say is enormously damaging to companies.
The Employment Appeals Tribunal ruled employers must consider overtime when calculating holiday pay, paving the way for higher future payments, said lawyers.
The court limited the scope of the decision, ruling that employees can’t seek pay dating back to 1998, which would have cost firms hundreds of millions of pounds in historic claims.
The suits focused on possible conflicts between UK law and the EU’s working time directive — which gives staff the right to 20 days of paid holiday a year.
“This ruling is going to have a profound impact on all UK businesses, costing them billions of pounds and potentially driving some to the wall,” said Darren Isaacs, a lawyer at GQ Employment Law in London.
The case considered whether voluntary overtime should be included in calculations of holiday pay, which most UK employers do not currently do.
“Although opinions are mixed and we do not agree with some of the findings, we are pleased with the limits put in place on retroactive claims,” Andrew Stones, a lawyer at Squire Patton Boggs who represented some of the companies involved in the case, said in an emailed statement.
The ruling has left business lobbying groups to call for a change in the law following a decision that could force businesses across the country to close down.
“The pressure being placed on businesses by both the British tribunals and European courts on the issue of holiday pay is becoming unbearable,” said Adam Marshall, executive director of policy and public affairs at the British Chambers of Commerce.