Reply to: Holiday Pay Case and Umbrellas

[LisaContractorUmbrella]

It would seem that the 'retrospective' element comes from the claimants who said that holiday pay should be calculated according to the hours worked, including overtime, and the fact that this wasn't done constitutes an unlawful deduction of earnings which would therefore be repayable if the case succeeded.

[LisaContractorUmbrella]

Hi ASB

Not got the judgement with me at the moment (just out of the office) but I seem to recall reading that any backdated claim would be subject to strict criteria and also subject to a maximum of three months. Happy for someone to clarify this but if correct it would at least limit exposure to employers somewhat.

Martin
Contratax Ltd

That's what I understand Martin

[northernladuk]

I agree. That is a perfectly reasonable way of looking at it.

Doh.. Spoil sport. Gotta find a newbie to have it out with now

[ASB]

Hi ASB

Not got the judgement with me at the moment (just out of the office) but I seem to recall reading that any backdated claim would be subject to strict criteria and also subject to a maximum of three months. Happy for someone to clarify this but if correct it would at least limit exposure to employers somewhat.

Martin
Contratax Ltd

Hopefully that is the way it will pan out.

Going forwards is not without risk if the judgement stands. In effect employers will have to prune overtime rates to account for the delayed payment of part of it in holiday pay. I can't see that going down too well.

Simplistically the additional payment can't just come off the employers bottom line. That would have a dramatic affect on the profitability of labour intensive enterprises.

[ASB]

But isn't overtime above and beyond normal hours and that is done by choice (lets remove the argument of jobs that overtime is standard, something altogether different is wrong there). Let's assume they don't have to work overtime, they chose to to top their wage up. They can't work the extra hours on holiday so they don't get paid it. In my simplistic scenario it seems black and white. I agree in jobs where overtime is mandatory there is a case. I guess a contractor forum isn't the place to discuss overtime though

I agree. That is a perfectly reasonable way of looking at it.

[northernladuk]

Yes and no.

It seems to me that one in effect get approximately 12% added on to salary/wages in the form of holiday pay. It is a reasonable concept that hourly paid working more hours this should be applied. There are a lot of people who may nominally work a 20 hour week but in fact work considerably more (and lord knows what the position is with zero hours contracts).

It is, of course, also the case that overtime sometimes attracts a premium etc.

[In the case of brolly is should be moot anyway since it all comes from the same pot, however it is eventually paid out].

Going forward, I think it is not unreasonable. Somebody may have "flat" hours paying them 150 quid a week. But due to overtime it is 300. When holiday is planned then it is 150 again. Yes of course they can plan for that, but with the parlous state of low paid finances that is not necessarily possible living pay packet to pay packet.

What is stupid - and it is not a little bit stupid it is mind-blowingly moronic - is the backdated nature. The rates set for overtime etc were set with an understanding of how it impacted the overall wage bill. What the liabilities were.

Employers are now at risk of, in effect, being presented with a bill for 12% of all overtime paid for the last 'n' years. Plus er's NI as well of course. I suppose there will be some saving graces in that all the accounts will need restating and it will result in a CT saving reducing the net impact to around 10% of all overtime payments.

So, going forwards it is fine. That's simply a view, others could reasonably hold a different view.

Going backwards (and technically it is not retrospective). Insane. Just another nail in small business coffins.

But isn't overtime above and beyond normal hours and that is done by choice (lets remove the argument of jobs that overtime is standard, something altogether different is wrong there). Let's assume they don't have to work overtime, they chose to to top their wage up. They can't work the extra hours on holiday so they don't get paid it. In my simplistic scenario it seems black and white. I agree in jobs where overtime is mandatory there is a case. I guess a contractor forum isn't the place to discuss overtime though

[ContrataxLtd]

Employers are now at risk of, in effect, being presented with a bill for 12% of all overtime paid for the last 'n' years. Plus er's NI as well of course. I suppose there will be some saving graces in that all the accounts will need restating and it will result in a CT saving reducing the net impact to around 10% of all overtime payments.

So, going forwards it is fine. That's simply a view, others could reasonably hold a different view.

Going backwards (and technically it is not retrospective). Insane. Just another nail in small business coffins.

Hi ASB

Not got the judgement with me at the moment (just out of the office) but I seem to recall reading that any backdated claim would be subject to strict criteria and also subject to a maximum of three months. Happy for someone to clarify this but if correct it would at least limit exposure to employers somewhat.

Martin
Contratax Ltd

[ASB]

Don't want to hijack this thread but anyone else think this overtime pay to be classed as standard (short and dirty summary) is a little bit stupid and retrospective payment of it is just ridiculous?

Yes and no.

It seems to me that one in effect get approximately 12% added on to salary/wages in the form of holiday pay. It is a reasonable concept that hourly paid working more hours this should be applied. There are a lot of people who may nominally work a 20 hour week but in fact work considerably more (and lord knows what the position is with zero hours contracts).

It is, of course, also the case that overtime sometimes attracts a premium etc.

[In the case of brolly is should be moot anyway since it all comes from the same pot, however it is eventually paid out].

Going forward, I think it is not unreasonable. Somebody may have "flat" hours paying them 150 quid a week. But due to overtime it is 300. When holiday is planned then it is 150 again. Yes of course they can plan for that, but with the parlous state of low paid finances that is not necessarily possible living pay packet to pay packet.

What is stupid - and it is not a little bit stupid it is mind-blowingly moronic - is the backdated nature. The rates set for overtime etc were set with an understanding of how it impacted the overall wage bill. What the liabilities were.

Employers are now at risk of, in effect, being presented with a bill for 12% of all overtime paid for the last 'n' years. Plus er's NI as well of course. I suppose there will be some saving graces in that all the accounts will need restating and it will result in a CT saving reducing the net impact to around 10% of all overtime payments.

So, going forwards it is fine. That's simply a view, others could reasonably hold a different view.

Going backwards (and technically it is not retrospective). Insane. Just another nail in small business coffins.

[ASB]

As I said I haven't read through the case yet (planned for today - I'll report back) but it shouldn't - if it applies to bonuses as well then all the major banks will be closing down before us

Nah, we will just give them a bailout.

But yes, that adds some clarity. If it is including bonus I could be claiming for 15% (approx) of mine. That would clearly be absurd. And no judgement would cause that. Ever.

[northernladuk]

Don't want to hijack this thread but anyone else think this overtime pay to be classed as standard (short and dirty summary) is a little bit stupid and retrospective payment of it is just ridiculous?

[LisaContractorUmbrella]

So, your belief is that the bonus you pay is not affected by the judgement and will not be included. Backdated claims could be hugely problematic for you (and unfairly so in my view) if this is not the case.

As I said I haven't read through the case yet (planned for today - I'll report back) but it shouldn't - if it applies to bonuses as well then all the major banks will be closing down before us

[ASB]

I haven't read through the EAT yet but I believe that the decision is going to be appealed so this is not set in stone just yet. Either way it shouldn't make any difference to umbrella companies as an over-arching contract, structured correctly, should be split between living wage (rather than minimum wage as a margin taken from the amount would take the earnings below the threshold) at a specific number of hours plus a profit related (rather than performance related) bonus.

So, your belief is that the bonus you pay is not affected by the judgement and will not be included. Backdated claims could be hugely problematic for you (and unfairly so in my view) if this is not the case.

[ASB]

Umbrella companies pay their employees from monies that are earnt by those employees. So i'd have thought that it didn't matter either way.

Sure you can claim overtime hours in holiday, or not. Either way, it's coming out of the same pocket.

Yes, it is coming "out of the same pocket". i.e. from the fees generated by the contractor. So, going forwards the difference it makes is less regular pay, more holiday pay. Basically a zero sum game there.

But, what about going backwards ??

It appears backdated claims may be made. Now, I know people (often) expect their brolly to pay out everything - er's NI, holiday pay, sick pay, smp, gap pay etc etc out of the 20 quid or whatever but this is unrealistic.

So, claim back 4 weeks holiday pay difference between real rate and minimum wage then there is only one place (initially) it is coming from. The brolly. And they don't really have it (at least have never accounted for it).

That could potentially kill a large number of brollys.

Those that can survive that with their finances will be in an awkward position. They will need to recoup that going forwards. That can only mean higher fees.

[LisaContractorUmbrella]

I haven't read through the EAT yet but I believe that the decision is going to be appealed so this is not set in stone just yet. Either way it shouldn't make any difference to umbrella companies as an over-arching contract, structured correctly, should be split between living wage (rather than minimum wage as a margin taken from the amount would take the earnings below the threshold) at a specific number of hours plus a profit related (rather than performance related) bonus.

[kingcook]

Umbrella companies pay their employees from monies that are earnt by those employees. So i'd have thought that it didn't matter either way.

Sure you can claim overtime hours in holiday, or not. Either way, it's coming out of the same pocket.