New shock ruling on holiday and overtime pay

There has be a significantly new change that has been decided by a British Employment Tribunal which means that UK businesses could be faced with millions if not billions of pounds in loss. The Employment Tribunal has now ruled that any overtime accrued by any member of staff must be taken into account when an employer calculates the employees holiday pay.

What Does This Mean?

This new change is based on non-guaranteed overtime. Claims made by employees towards their employer will be limited.

The new requirements will involve additional national insurance and payroll costs for businesses of a variety of sizes, but these necessities will be felt considerably by small businesses. The exercise of having to include these additional payments even when employees are not at work can be a financial blow to small businesses across the UK. The FSB has recently warned that companies may be faced to make redundancies or could even force closure. Many businesses may be concerned about the extra management time and costs involved in reviewing and renewing their employment contracts along with working practices and having to alter payroll systems. This will be a real burden for companies who don’t house a large HR team.

The appeal received by the Employment Appeal Tribunal (known as the EAT) of whom made this ruling were recently brought by the law firm Squire Patton Boggs. This is a firm who highlighted that the EAT had reached 3 primary conclusions:

  • Non-guaranteed overtime will now be required to be taken into account when business employers calculate their employees holiday entitlement. This is primarily with regards to the four week entitlement that is extracted from the WTD (Working Time Directive). The current EU law states that employees are entitled to secure “normal remuneration” for annual overtime and leave would need to be regular to amount to this common remuneration.
  • The WTR who were implemented within the United Kingdom back in 1998 must acknowledge the requirements within the WTD. The Employment Appeals Tribunal highlighted that it was obligated to interpret the WTR as long as possible. This is in relation to its purpose and wording and was planned if necessary to investigate into the WTR to accomplish this.
  • Lastly there will be a limited opportunity for employees to claim back their underpayments of holiday pay. The EAT were capable to conclude that workers were not capable to claim any underpayments for holiday as deducted unlawfully from their payslip, where a time frame of over a three months duration had passed between pay deductions.

This means for employees who choose to work overtime could claim for extra holiday pay. Presently, only a basic pay is considered when calculating payment for holidays. The tribunal also ruled that employees are able to make backdated claims, but for a limited time only. Nevertheless, the ruling could be passed to the Court of Appeal, this means we could expect a final decision in years to come. The decision has extensive implications for businesses where employees are required to do work overtime as a normal part of their job. Lawyers have mentioned that the tribunal wasn’t coherent as to whether the ruling applied to employees who voluntary work overtime.

Implications for Businesses

This ruling will unmistakably bring many implications for businesses across the United Kingdom and to know where you stand it’s recommended that you to speak to a legal professional.

It’s now down to the EAT and other official bodies to agree as to how far claims can go back for employers. It’s possible that a handful of claims may even date back to 1998, when the UK Working Regulations were originally introduced. The government has now estimated that in total, approximately a sixth of individuals currently in employment will work overtime and will be entitled to repayment, which totals up to 5 million people.

For a majority of businesses this may be an additional expense that will need considering into their business, but for many this may cause a serious problem for the continuity of their business. We would always recommend to seek advice from a professional payroll service like CPS Payroll Services. They covered this topic recently here –


The importance of an employment contract

When many people speak about a contract of employment, they usually have a written document in mind. However, a contract of employment doesn’t necessarily need to be written in a document at all. A contract is another term for an agreement. Nevertheless, employers who choose not to place the terms of employment within a written document, do so at their peril.

An solid and detailed employment contract is extremely important and not to mention beneficial to both the employer and the employee. A well written and evaluated contracted should outline the obligations, the rights, the wrongs for each party involved. Not only does it highlight the rules and regulations of an employment role but it also aids in job security for the employee and can protects the employer from specific risks such as the release of confidential employer details and information after employment term is finished. A handful of jurisdictions require a written up employment contract for specific job roles.

Employment Term

Many employment contracts set a clear and definitive outline of the employment term. This reassures employees a job as long as they don’t infringe the terms within the contract, and also allows employers to dismiss a member of staff at the end of their term. The length of this contracted term is often carefully negotiated before starting the employment.

Employment Termination

A good example of an employment contract will determine exactly what offenses can lead to a dismissal or official termination of the employee. This helps both parties, as it ensures that the employee knows which activities or actions are required and which are entirely forbidden. This means rendering a serious offence less likely during employment. It’s recommended that the current labor law of this specific jurisdiction should be considered to make sure that the terms of the employment contract do not contradict with any legal requirements.

Employment Duties

The duties and job roles of both the employee and the employer should be outlined clearly and spelled out within business employment contract. This section of the contract should primarily include the job duties of the employee, along with benefits and salary. If there are any overtime incentives, this should also be included within the contract document. It also should be mentioned within the contract that the employer holds the right to transfer the employee to another job role or position, however if this happens, the employment contract needs to be updated to reflect the employee’s new duties in their new job role.

Non ompetition Covenants

If the new employee will have specific access to various confidential files or company information, it is extremely important from the employer’s perspective to include a clause that prevents the employee from divulging any details or information to others. An employer may also want to prohibit the employee from working with or for other business competitors, although the labor laws of many jurisdictions differ on the acceptability on such a clause. Nevertheless, in both cases, non compete clauses are commonly binding on the employee for a specific period (this could be two or three years, for example) after termination of the employment.

Dispute Resolution

Another good example of an employment contract will clearly outline dispute resolution measures that can minimise the expenses and considerable amount of time of a legal courtroom battle that in most cases neither party can or wants to pay for. Procedures to settle a dispute usually reduce expenses and time, although many appeals from from arbitration decisions are commonly quite difficult. A range of jurisdictions will require that employment disputes should be brought to an appropriate employment dispute (disagreement) resolution tribunal, and if in which case, then no dispute resolution clause within the contract is necessary or required.

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How to grow your business in 2015 with an apprentice

After the destruction of the economic crisis, it seems that the economy is slowly but surely recovering, but it appears that there are still huge challenges for businesses who are trying to grow. Skill shortages are a significant become an a partial threat to many sides of a business. Nevertheless many of you reading this article may not have realised that a great and cost effective way to build solid foundations for your business is to harness fresh talent in the form of business apprentices.

There are a wide variety of advantages when bringing eager new employees into your company or business. Apprenticeships today cover a wider range of industries and skills than ever before.

Within the United Kingdom, a vast number of apprenticeships that were advertised have soared incredibly within a year. Approximately over 500,000 people took advantage of advertised Apprenticeships in the past years. The capital, London saw a significant rise of up to 10% in Apprenticeships, along with the numbers of applications submitted raised astonishing up to 26%.

In this article we can take a deeper look at the benefits that an apprentice can bring to your business and how they can help turn talent into growth for your business.

Increased productivity

It’s common knowledge that apprenticeships assist businesses boost their productivity by introducing new talent that rapidly helps to grow your business skill base. Businesses who have been involved in apprenticeship schemes have reported significant improvement in productivity as a result of hiring an apprentice.

It’s been reported that the average apprenticeship can increases business productivity hundreds of pounds per week.

Fresh ideas & genuine enthusiasm

Hiring apprentices means that they will be involved in ‘on the job’ training as well as external training in the form of a learning provider such as a college or alternative form of education service. This business arrangement is a great way to bring in fresh ideas and unique innovation into your business. Busy businesses can often struggle to keep up the pace with new ways of thinking or motivating other employees of staff.

When successfully injection an apprentice into your business will mean they can be entered in for local awards, events and competitions that can help promote your business.

Priceless Loyalty

For business owners that haven’t yet experienced apprenticeships before are can understandably be anxious or even cautious about bringing in an inexperienced young person into their business. Through the carefully structured scheme of an Apprenticeship, you as a business owner has the opportunity to develop a motivated, skilled young individual.


Vacancies in apprenticeship have increased significantly at a record rate of up to 20,000 reported spots available at any given time.

Recruitment costs of apprenticeships are currently at an all time low, which are significantly lower than with non-apprentices.

Grants and financial support

Apprenticeships allow young skilled individuals to earn while they are able to learn in a genuine working environment, which allows them to gain valuable qualifications that they desire. Keep in mind if you are interested in investing into an apprentice, they must be paid at least the national apprenticeship minimum wage which is £2.73 (at the time of publishing) and companies with less than 1,000 staff are able to apply for an Apprenticeship grant of up to £1,500.

Economic benefits

Inviting apprentices into your business certainly has a positive impact on our current economy let alone your own business growth. After completing an apprenticeship scheme, 86% of apprentices choose to remain within their employment. This assists in building and maintaining an active workforce, which is unarguably great news for your business.

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