An Employment Appeal Tribunal has ruled that employers should include overtime in holiday pay.
The new ruling will mean that employees working compulsory overtime can claim for additional holiday pay to take into account their additional work.
Currently, holiday pay is based on an individual’s basic pay and doesn’t cover overtime.
It has yet to be revealed whether claims for lost holiday pay can be backdated.
Business impact of overtime ruling
It is estimated that over 5 million people regularly work overtime. As a result the landmark ruling could have widespread cost and management implications for the UK economy and companies paying overtime to staff even though they have complied with UK law.
To help address the issue going forward it is important for employers to evaluate how they currently calculate holiday pay and consider investing in a modern time and attendance system.
With a modern system, employers can reduce the administration costs and workload involved in managing overtime whilst minimising compliance risk to employment regulations.
Fully audited attendance trail
The latest systems such as Vanquish create a comprehensive audit trail of employee attendance, enabling managers to gain a clear view retrospectively of the historical hours worked by individuals, including overtime.
By gaining a clear visibility of staff time, managers can ensure staff are paid accurately and, if the new ruling is upheld, apply the correct rates to their holiday pay too.
Moreover, managers can schedule staff rosters with greater accuracy and according to future workload demands, meaning overtime requests can be kept to a minimum. This can help organisations to make bottom line savings.
Meanwhile self-service functions enable employees to manage their own working time and accept or decline overtime requests made by line managers.
The new ruling will have dramatic consequences for UK employers and will force many organisations to put arrangements in place to better manage staff time and keep overtime requests to a minimum. Time and attendance systems will become central to successful management.