Partner Article

The rising cost of overtime

Amy Ross-Sercombe – Head of the Employment team at Clough & Willis on the rising cost of overtime

With The Department for Business, Innovation & Skills tweeting its promise of a taskforce to look at limiting the impact of The Employment Appeal Tribunal’s Judgment in the cases of Bear Scotland Ltd and others v Fulton, Hertel (UK) Ltd v Woods and Others and Amec Group Ltd v Law and others, so quickly after its publication last week, employers’ knew it was bad news. Justice Langstaff determined that non-guaranteed overtime and payments for time spent travelling should be taken into account when calculating holiday pay. It will be a consolation to many to know that it is not without limit. Mr Justice Langstaff stated that in order for an overtime payment to become relevant, it must be paid over a sufficient period of time.

This increasing burden on employers follows on from earlier case law (Williams and Lock) determining that various allowances, supplements and commission must be taken into account when calculating holiday pay. Overall, holidays are an expensive business and, no doubt, employers will be looking for practical solutions. Some will simply bring an end to any over time, perhaps bringing in agency workers. Others will change shift patterns, freeze pay and some say they will have to make redundancies.

Employers should take note that in the Hertel and Amec cases Mr Justice Langstaff, found that although the employees had regularly worked 44 hours a week over a significant period, six of which were non-guaranteed overtime, only the core 38 hours were relevant for the purposes of calculating holiday pay. This was due to the construction of the various contracts in place and the particular facts of those cases. For most this is unlikely to assist with current claims but tightening up contractual terms for the future should certainly be considered alongside practical solutions to the problem.

Employers may be familiar with a Claimant’s ability to link a series of deductions such that they can claim for underpayments going back several months or years so long as the claim is made within three months of the last deduction. The good news is that if there is a gap of three months between underpayments, this will break the chain.

Mr Justice Langstaff gave permission to appeal so it is highly likely we will be re-visiting these issues.

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This was posted in Bdaily's Members' News section by Clough & Willis .