Holiday pay rule could drive up costs for manufacturers

Posted on 5 Nov 2014 by Victoria Fitzgerald

EEF have welcomed the announcement of a taskforce to examine the impact of yesterday's holiday pay ruling.

Government has created a taskforce to assess the implications of a landmark tribunal ruling that overtime should be taken into account when holiday pay is calculated.

The decision by the Employment Appeal Tribunal has paved the way for payouts worth thousands of pounds to workers.

Research conducted by EEF reveals more than two thirds of manufacturers (68%) estimate that the change to holiday pay calculations will add more than 3% to their current pay roll costs – four in ten (43%) anticipate an increase of at least 5%.

44% will scale back investment plans, 31% will slash innovation activity and 36% will cut back on training.

Tim Thomas, head of employment policy at EEF, says: “The announcement of a taskforce to look at the implications of today’s ruling and to hopefully protect businesses from its fallout, is hugely welcome. Government has clearly listened to the concerns that businesses have been raising.

“If unchecked, this ruling will have far-reaching and potentially damaging consequences for jobs and investment. In the short-term, over nine in ten manufacturers (93%) are set to see payroll costs spiral.

“But the real damage will come further down the line – six in ten firms will have little option but to factor the additional costs in to future pay negotiations, while over half will look to reduce overtime – a quarter may even be forced to reduce headcount.

“Everyone agrees that workers should be paid properly and fairly, but the effect of this ruling could be that it turns growth and jobs into dust and that’s something this taskforce has to try to avoid.”