Firms 'facing holiday pay changes'

Businesses face huge extra costs because of possible changes to the way holiday pay is calculated, according to a leading employers' group.

The CBI said a recent ruling by the European Court of Justice could lead to holiday pay being 'redefined' to include an allowance for commission
The CBI said a recent ruling by the European Court of Justice could lead to holiday pay being 'redefined' to include an allowance for commission

The CBI said a recent ruling by the European Court of Justice could lead to holiday pay being "redefined" to include an allowance for commission.

The business group said "legal goalposts" were being moved, which could lead to "back-door" employment law.

Katja Hall, the CBI's deputy director general, said: "Backdated claims on holiday pay could lead to bills of millions of pounds for each business, and ultimately threaten their very existence.

"Businesses that have done the right thing and fully complied with UK law suddenly face the threat of substantial additional costs. And the companies most at risk are in vital sectors for our economy, such as manufacturing, construction and civil engineering.

"Although most businesses believe we are better off in a reformed EU, there is a real danger of expansive decisions being made by the European Court of Justice on the UK labour market. As part of an EU reform programme, this has to be addressed and it's time to put a stop to back-door EU employment law being made.

"We need the UK Government to take a strong stand and do all it can to remove this threat. Otherwise we face the very real prospect of successful firms in this country going out of business, with the jobs they provide going too."

TUC general secretary Frances O'Grady said: "Millions of workers lose out financially when they take time off because their employer ignores hard-earned bonuses and commission when calculating holiday pay. This loophole often discourages staff from taking a much needed break from work. It is completely unfair and getting rid of it is long overdue.

"Good employers already pay their staff proper holiday pay and won't be affected by these cases. The CBI should encourage its members to pay its staff properly, rather than defend archaic rules that allow employers to short-change their staff on holiday pay."

A Business Department spokesman said: "The Government wants to get the right balance between the needs of employers and employees, and does not believe voluntary overtime should be included in holiday pay or that large backdated claims should be allowed.

"The right to paid holiday is very important and the UK offers a very generous entitlement of 28 days, which goes beyond the 20 days required in the Working Time Directive.

"We understand the deep concern felt by many employers and will be intervening in the Employment Appeal Tribunal cases to make our views clear. It is unnecessary and inappropriate for the EU to lay down rules on points of such detail."