Construction News has reported that UK contractors are fearing an increase in labour costs after an employment tribunal appeal ruled that overtime pay should be included in workers’ holiday pay.
The judge awarded the verdict following appeals by major construction and engineering firms Amec and Hertel.
They were appealing against a decision at a previous tribunal from February 2014, and another case involving road maintenance provider Bear Scotland.
It was ruled that overtime pay was part of “normal remuneration” and should be included in holiday pay calculation.
Traditionally, most construction sector employers do not include voluntary overtime pay when calculating holiday pay.
The original case against Amec and Hertel had been brought by union Unite on behalf of 16 of its members, who had worked at West Burton power station site on a project.
The employees had been required to work overtime and were due payments for travelling time. However, those payments had not been included in holiday pay meaning the workers received less pay when on holiday.
Construction News quoted Ed Goodwyn, Pinsent Masons partner, as saying the decision “should be sounding alarm bells in boardrooms around the UK, as the outcome of the case will have a direct effect on company financial results”.
However, he also felt it was likely that the decision would be appealed.
Vince Cable, business secretary, reacted to the ruling by announcing that he would set up a task force to discuss how to limit the case’s impact on contractor firms. He said the task force would be made up of officials from several government departments and business representative groups.
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