Employment

Risk management and holiday pay – time to get ahead

For anyone not in the loop, the government announced a plan before Christmas to legislate to restrict holiday back pay claims to two years. It is a positive move for employers and, taken together with the November decision in Bear Scotland v Fulton, will reduce anxiety about the need to accrue for liability. It might be enough to force the no win no fee operators to shut up shop.

The flip side of the coin is that the legislation could result in increased claims between now and the date in July when the statute is due to come into force. Unions will be under some pressure to protect member’s rights. Even before these developments we knew that ACAS were dealing with over 300 group claims through early conciliation, 90% of which were raised in Scotland. We saw a very high level of mobilisation of claimants in equal pay claims in comparison with England and Wales – holiday pay could be similar.

And the developments don’t affect the debate about what you need to do to comply with the law now. Lots of material and commentary on the subject is now available on the internet and social media, but not all of it is constructive. At Brodies we are advocating a constructive approach. This kind of pressure can generate creativity and change. It is prompting reviews of sales incentives, allowances for unsocial working hours and the management of overtime. Quality legal advice should(as a minimum) help to size the issue and ensure that it stays in perspective. At best it may support new thinking on remuneration and resourcing.

So if you are formulating a plan, the main components are these:

  • Audit – you can do this at varying levels of sophistication, but you still need to get an idea of the potential scale of the issue in your business. If you need to work out how to approach that, read the updates on our website or give us a call.
  • Raise the issue with finance – you are not scaremongering by doing this – you are just helping to ensure that the business has a contingency plan. Some clients who have worried about the size of the problem have been pleasantly surprised. The impact is not likely to be catastrophic, but there are no prizes for complacency.
  • Benchmark – talking to those involved in responding to or handling claims is going to be useful. Industry bodies and representative organisations are also dealing with questions and may be able to provide useful insight.
  • Decide whether it makes sense to make any changes now – you will see commentary on many websites about this but little clear guidance, mainly because there is no ‘one size fits all’. There are some types of payment that you really should include from now on – e.g. regular payments for call-out worked on a rota or individual productivity. But for overtime, for instance, the position is not clear. It remains possible that voluntary, sporadic overtime need not be included. But at what point does it become regular and part of ‘normal pay’ and how to you identify that? These are tricky questions and can only be answered properly and commercially within the context of your own business.
  • Review your remuneration strategy – is it possible to look at how you are approaching the management of variable pay, overtime etc. so that you address the holiday pay costs for the future?
  • Review your processes – If you include certain new payments, are you doing it for all leave, or just the ‘euro’ leave? How will you adjust your payroll processes? Is your payroll provider on top of this and proposing solutions?
  • Think about how you will manage future claims – although there is no such thing as a ‘collective grievance’ under the ACAS code, we know that employers are getting approaches from unions on behalf of their members, so you think ahead about how you might respond to these. How will you deal with the administration of claims if they come in in batches? For larger employers this may require resource and possibly technology support so we are offering a case management system that helps to manage data, time limits, ET administration efficiently and effectively.

Don’t be caught napping on this one. It might not be a time for pure DIY, so give us a call and make sure that you are doing what you can to ensure that the issue is on the right agenda and getting the right level of attention for your business.

Joan Cradden

Partner at Brodies LLP
Joan is a partner at Brodies and is leading and managing the firm's employment team. She is an experienced litigator and has specialist expertise in TUPE, International and European employment law, discrimination, contracts, policy drafting and industrial relations.
Joan Cradden