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Do you pay overtime, commission or bonuses? If yes, you need to read this article

Yesterday saw a landmark judgement from the Employment Appeal Tribunal that will have significant implications for employers who regularly provide overtime. The press has covered the issue to varying degrees of accuracy, and we would strongly encourage employers to review their payment practices and employment contracts/staff handbooks now. This is particularly important as action taken ahead of any appeal could prevent claims being brought, and in some cases holiday pay shortfalls could cause rectification payments going back to 1998.

Yesterday judgement was delivered on the conjoined cases of Fulton, Woods & Law Vs Bear Scotland Ltd , Hertel Ltd and Amec Ltd concerning overtime and travel allowances and their impact or otherwise on the calculation of holiday pay. This comes on the back of the £40m John Lewis settlement we reported earlier and on other cases concerning commission payments, and the implication of that on holiday pay.

On the back of the instant case the government has already formed an action group to look at the potential impact of the judgement, which may yet be appealed. For these reasons now is now is not the time to panic, but sensible employers should take the time to review their pay policies, employment contract wording and (if they have one) staff handbook.

This advice applies in particular employers who have recently paid, or expect to pay in the future any of the following:

  • Commission pay
  • Overtime payments, including weekend payments
  • Regular bonuses relating to work done
  • Call out pay or ‘sleep in’ pay

If your business makes payments to staff in one or more of these categories it is important to clarify whether or not the element in question needs to be factored in for holiday pay calculation purposes and to make necessary amendments to employment contracts and handbooks. The type of clauses that are of most interests are those relating to the payments concerned and also any general clauses around working additional hours particularly, in the latter case, where the clause implies that employees (or workers) have to make additional hours available.

We would ask all mHRdept clients to check their employment contracts and handbooks and to discuss any concerns and necessary actions with us sooner rather than later. For those businesses who are not currently myHRdept clients, a review and rewrite of existing contracts is available from us for a fixed fee of £250 + vat. Please contact us for more information.

If you’re thinking of outsourcing your HR why not contact With full service packages for medium sized companies typically from only a few hundred per month (and from only £100 per month for smaller companies and start-ups) we believe we offer the best combination of quality and price available in the UK. Call us on 01628 820515 to discuss your requirements or email us here and we’ll call you back.

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