Holiday Pay Update

In the most recent development in this saga (which the Employment team has reported on previously), this month John Lewis and Waitrose have confirmed that they will be making substantial payments to staff whose holiday pay failed to take into account the overtime which they were working.

The John Lewis Partnership have announced that, going forward, all staff will be paid holiday pay that takes into account their normal overtime.  They have also agreed to make a one off back payment to staff that covers underpayments in respect of any holidays taken since 1 November 2014 (on the basis that this date coincided with the date of the EAT judgment).

They estimated that the additional payroll cost of these changes will be in the region of £12 million; most of this cost relates to Waitrose employees, where overtime is more common.

Tracey Killen, the employer’s director of personnel, said: “The John Lewis Partnership has acted promptly to change its pay practices in response to the EAT ruling. We believe our approach is a fair and practical outcome for our partners in light of this decision.”

There remain many grey areas associated with the calculation of holiday pay:

•  What is the status of truly “voluntary” overtime?
•  How should employers be calculating holiday pay entitlements where overtime
    arrangements fluctuate, for example to meet seasonal demand?
•  What about other types of allowances/benefits: which should be included when
    calculating holiday pay and which should not?
•  Should employers be distinguishing between different “types” of annual leave?

These issues are likely to continue rumbling on throughout 2015; the next development, the hearing in the employment tribunal case of Lock v British Gas (which will give further guidance on whether commission payments must be paid during periods of holiday) is expected to take place next month.

For a fixed fee, we can provide you with a review of your current holiday pay arrangements identify any legal risks and make recommendations about what action to take as a result of this case.