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Ruling could spark overhaul of Yorkshire companies’ pay structures, says EY Director

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A recent ruling requiring certain types of overtime to be taken into account when calculating employees’ holiday pay could change the way that many large employers in Yorkshire structure their workers’ remuneration and reward packages, according to a Director at EY in the region.

The recent changes mean that pay for annual leave now has to include regular non-contractual overtime and, in some cases, contractual commission – as these are considered normal pay for employees.

An increase in workers claiming for unpaid historic holiday pay in respect of the new rules through employment tribunals is expected, with the Government deciding in December 2014 that workers could make claims for annual leave taken over the previous two years.

In the wake of the changes Luigi Falivene, who is part of EY’s Human Capital practice in Yorkshire, expects some companies in the region to review their employees’ pay arrangements and move workers on to new remuneration structures to avoid exposing their business to future claims for lost holiday pay.

Luigi said: “The new rules will certainly have grabbed the attention of companies and organisations in Yorkshire which have large workforces and where employees do regular overtime. The ruling presents a huge challenge but also a huge opportunity for these employers.

“Employers need to decide whether they are able to calculate holiday pay in respect of the new rules at the moment. It’s likely that some large companies in Yorkshire will decide that that it’s in their interest to move employees on to new reward packages which include regular contracted overtime, making it simpler to accurately pay annual leave and protecting their businesses against future claims to employment tribunals.

“While the process will initially pose an administrative headache, it gives employers a significant opportunity to re-engage employees, providing them with new, more secure contracts which could potentially include a range of new benefits to incentivise them and reaffirm their value to the organisation.

“Employment terms offered by large employers are under increasing public and political scrutiny, so the ruling could act as a trigger for businesses to look at their remuneration structures.” 

Luigi Falivene
Luigi Falivene

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