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Guest article: Holiday pay ruling could damage construction businesses

Last week, workers throughout the construction industry celebrated a landmark judgment, ruling that overtime will now be included in their holiday pay. The news however has been met with dismay from businesses who will now have to consider the financial implications of the judgment heading into the festive period, which always presents complicated overtime scenarios in the construction sector.

The judgment, which is expected to benefit over 5 million workers nation-wide is a result of joint Employment Appeal Tribunal (“EAT”) cases from workers claiming that voluntary overtime pay should be included in their holiday pay. Prior to the October decision there was no requirement for such a payment to be included.

There was some light relief for employers however as the EAT rejected claims from the workers that they should be paid for historic underpayments of holiday pay, potentially dating back to 1998.

This part of the judgment will come as a great relief to employers, some of whom would have faced uncertain future had they been held liable for claims dating back to 1998. Whilst employers will be celebrating the judgment in respect of backdated claims, there is an indication that workers may still be able to claim underpayments for the previous 3 months if holidays have been taken in that period. This however is a drop in the ocean compared to the worst case scenario going back to 1998 which, frankly, could have been sufficiently financially damaging to the construction sector as to wipe out the growth we have finally been seeing over the last quarter”.

However, the judgment itself, if taken literally, may cause extra administrative burden for businesses as it applies only to the 20 days holiday granted under European law and not the minimum 28 days as provided by UK law. Whether businesses think that the saving of not applying the ruling to those extra 8 days is worth it from an administrative point of view will need to be taken by each business individually”.

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These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

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