Small Businesses to Restrict Overtime due to EAT Holiday Pay Ruling

Majority of small firms disagree with holiday pay ruling as FSB predict 400,000 businesses will be affected

One in 10 small businesses have confirmed they will limit the amount of overtime worked by staff following the Employment Appeal Tribunal’s (EAT) holiday pay ruling, which could affect 295,000 employees.

The Federation of Small Business (FSB) predicts that 400,000 small firms will be affected by the new holiday pay rule, with many small firms showing concerns over what this will mean for them financially as employees have the right to back-claim wages under the law.62% of business owners disagree with the ruling according to a Sage survey of 285 small businesses.

The research also found that 29% of small enterprises were concerned about the impact the ruling will have on their business and 12% firms were not even aware of the ruling – emphasising a disconnection between EAT’s decision and the small business community.

The EAT ruling, which was announced on November 4, means that holiday pay must include non-guaranteed overtime worked by an employee in the 12 weeks before the holiday. Prior to this, business owners have been paying holiday pay based on basic pay but now employers have to consider certain types of overtime, and perhaps bonus payments and commission.

Lee Perkins, managing director of Sage’s small business division, discussed the new law:

“The holiday pay ruling will undoubtedly create new challenges for businesses paying staff that regularly take overtime paid hours.

“The complexities mean a significant number of business owners are in the dark as to what to do next. This will be more clearly felt by small firms which do not have the same resources as larger businesses to easily make adjustments.”

For more information on how the EAT holiday ruling affects small businesses and how to manage it, have a look at’s guide here.

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