John Lewis Announces Holiday Pay Plan

The John Lewis Partnership has announced its plans for dealing with the Employment Appeal Tribunal ruling on holiday pay. In light of the decision, John Lewis will be including overtime when calculating holiday pay for its staff from February 2015. The anticipated additional costs will be around £12 million annually (including pension, bonus and employer’s NI).

In addition to the annual costs, John Lewis have apportioned an additional £3 million to be paid as a “one-off back payment” for holidays taken since 1 November 2014 and £7 million for pension liabilities “in order to align as closely as possible to the date of the ruling” made on 4 November 2014.

The announcement is important for two reasons: 1) it’s the first statement from a national employer explaining how they have implemented the ruling; and 2) the figures show that, contrary to widespread speculation on the financial impact of the ruling, John Lewis has reported that the value of the additional annual costs in moving forward represents less than 1% of its total annual payroll costs.

It is interesting to see what the larger employers are doing about holiday pay. Whether the additional 1% payroll cost has an impact on pay rises this year and subsequent years remains to be seen.

We will keep you up to date with any future developments on the holiday pay issue. If you have any queries in the meantime please contact Roisin Patton, associate in the employment team at Square One Law LLP on 0843 224 7936.