Holiday pay ruling could threaten small businesses' survival

Date: 11th June 2009

The future of some small businesses could be jeopardised as a result of a Law Lords ruling concerning holiday pay, an expert has suggested.

Companies will now have to pay employees holiday pay in instances of sickness and for any holiday remaining at the end of a contract.

The current rule states that employees must use their holiday allocation within a year, as stipulated in the UK's Time and Regulations.

The financial implications could be huge, with smaller businesses at particular risk.

Tim Marshall, of law firm DLA Piper, said: "It could prove too much for some employers struggling to protect their bottom line and avoid making staff redundant," according to thisismoney.co.uk.

The Court of Appeal initially rejected an HMRC employee's claim for wage reimbursement over days taken due to poor health.

Law Lords overturned the ruling however after consulting the European Court of Justice on the matter.

It is as a result of this case that the new rule has been passed.