Farmers should review workers’ contracts after holiday pay ruling

Farmers who regularly have staff working overtime should review their contracts to see if they are affected by a recent ruling on holiday pay.

The UK Employment Appeal Tribunal ruled last week that workers’ holiday pay should be based on more than just basic pay, and should take into account an employee’s overall pay, including bonuses, commissions and non-guaranteed overtime payments.

This could affect farming businesses where overtime is paid separately to basic pay, for instance where an employee is paid a basic pay for set hours, but paid double-time or time-and-a-half for overtime work.

Mike Harrison, partner at chartered accountant Saffery Champness, said the ruling aims to stamp out practices where employers pay a very low basic wage, sometimes below minimum wage, which is brought up by overtime pay or other payments, but where holiday pay is only paid at the low basic rate.

Most farming businesses were unlikely to be affected, however, said Mr Harrison, because they tended to pay workers a salary, assuming that some seasons would require longer hours and others shorter hours.

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“It may lead to farming businesses reviewing their payroll arrangements and implementing salary-based payments, but they need to be sure these comply with minimum wage requirements,” said Mr Harrison.

“Employers may also restructure to make less overtime work available.”

Farming enterprises also tended to have a small number of employees and the kind of relationships with workers where issues could be sorted out between them. It was important farmers were aware of the ruling and thought about its consequences, but it was not something the majority would “need to lose sleep over”, said Mr Harrison.

Matthew Potter, partner at law firm Birketts, said farmers that had workers on contracts setting out what hours were paid at a basic rate and how much was paid for any overtime could be caught out by the change. 

“The important thing is to undertake an audit to look at the employment contracts to find out if it would affect your business.”

NFU employment policy adviser Lee Osborne said the union was still consulting with its members to understand the effect of the ruling, but that sectors were likely to be affected differently.

A government taskforce has been set up, led by Vince Cable, to look into the possible implications of the ruling for businesses.

“Government will review the judgment in detail as a matter of urgency,” said Mr Cable. “To properly understand the financial exposure employers face, we have set up a taskforce of representatives from government and business to discuss how we can limit the effects on businesses. The group will convene shortly to discuss the judgment.”

For advice, NFU members can call 0370 845 8458.

Employers and employees can contact Acas for free support and advice on 0300 123 1100.