Comment: Employment time bomb | M&S challenge

THERE are times when newspapers are guilty of hyperbole, but yesterday’s ruling by the Employment Appeals Tribunal (EAT) that overtime should be included when holiday pay is calculated is not one of them.

Companies face a multibillion-pound bill after a tribunal ruling has paved the way for mass claims for backdated holiday pay. Picture: PA

If the ruling stands – and given its major significance for British business, it is a racing cert to go to Scotland’s Court of Session and the Appeal Court in England at the very least – it could get very messy.

Business organisations have reacted strongly. They have claimed vociferously that the landmark – and somewhat out-of-left-field – decision by the tribunal could cost employers many hundreds of millions, even billions, of pounds through a mixture of backdated and future claims by employees that they have been short-changed.

Unions and claims management companies must be salivating. Some legal authorities are already comparing the potential financial hit and public relations damage to businesses to the body blows that the payment protection insurance (PPI) scandal has dealt to the banks.

And it is the disruption, not just the financial damage. The business lobby said, for small and large firms going back through their records of holiday pay with millions of part-time and casual workers, it could be an administrative nightmare. Managers will have to estimate overtime and commission rates of staff on vacation.

Organisations such as employers group the CBI and the British Chambers of Commerce said for many firms such an extra financial burden could be the tipping point to closure, with an accompanying big jobs impact.

The oil and gas industry, as well as the retail sector – with their highly fluid workforces and voluntary overtime arrangements – would seem to be in the harshest part of the storm.

Particularly relevant for the ­Aberdeen-based energy industry, ­allowances and offshore bonuses are commonly used ways of paying staff, with the potential for even more dust to be thrown into the holiday pay ­machinery.

And could there be painful and complex repercussions, with the ­payments that companies make to pensions also being caught up in the new confusion?

It is said that personnel directors have known of this problem for quite a while, but have often not been able to convince boardrooms of the ticking time bomb that originates from the European Union Working Time Directive and how the UK has interpreted it.

Historically, British companies have not included voluntary overtime in their calculation of holiday, only paying basic salary – but the EAT has ­declared this was plain wrong.

The shock to the business system has been delivered, battle lines have been drawn, and this is one furore that looks as if it has legs.

Primark revs up, but is M&S marking time?

Marc Bolland at Marks & Spencer could have done without the sashay of parvenu rival Primark on the eve of what is expected to be the 13th consecutive quarter of falling clothes sales posted by M&S this morning.

True, Bolland has slowed the rate of decline, and his company’s new fashions have had a decent trade press, but M&S’s clothing sales will be up against the impressive latest 10 per cent growth at Primark.

Its rival’s figures have also reduced any latitude M&S might have had to blame unseasonably warm autumn weather for any impact on its clothing sales. It could be a tough gig for the M&S man, now more than four years into his tenure.