This was written by Albert Bargery, employment solicitor at Parrott & Coales.

There's no escaping The Employment Appeal Tribunal (EAT)'s groundbreaking judgment this week confirming that workers are entitled to have non-guaranteed overtime factored in to their holiday pay.

We've read how millions of employees will be affected by the ruling but what does this change in the law mean for HR professionals when calculating holiday pay and considering terms of employment?

Firstly, overtime pay must now be taken into account when calculating any EU holiday pay but this only applies to the minimum four-week EU entitlement. It does not include the additional 1.6 weeks’ leave provided under the EU Working Time Directive (WTD), or indeed any contractual holiday on top of that.

There are still many questions over holiday pay calculations which are not set to be answered any time soon given the likelihood of an appeal on this case.  In the meantime, HR professionals need to decide whether they will operate two types of holiday pay (one for the four weeks derived from the WTD and another for the 1.6 weeks of additional leave under domestic law). Alternatively, for administrative convenience, they could simply adopt the 'normal remuneration,' such as including non-guaranteed overtime, for a worker's entire holiday allowance.

Whatever method they choose, including overtime in holiday pay could well see pay-roll and salary costs increase; some business groups have indicated salary costs could increase by as much as 5%.

Overhead costs may also rise as many businesses will increase their use of agency or bank staff, during times of increased demand, so as to minimise the employers liability for overtime and holiday pay. Whilst many HR departments will immediately consider reducing the opportunities for overtime.

So will this judgment open the floodgates for historic holiday pay claims?

Businesses need to brace themselves for numerous backdated claims by employees, and any ongoing financial audits of potential exposure to this risk needs to factor this in.

However the EAT did limit the scope for workers to pursue historic claims for arrears of holiday pay.

The EAT decided that claims alleging underpayment of holiday pay will be time barred if there was a break of three months or more between successive underpayments. If there is  no “series of deductions” from holiday pay, then tribunals will not have jurisdiction to hear such claims.

Further, workers cannot chose whether a particular claim falls under EU holiday regulation or holiday under their contract of employment because the EAT decision is related to EU holiday entitlement. Workers will also have to present repeated claims to the tribunal where they are complaining about a number of deductions.

The restrictions in place surrounding backdated claims should prevent the floodgates opening but it's important to be prepared. Consider what claims could be made from past cases and revisit holiday pay structures and any tasks linked to pay.

Ultimately ensure that staff are no worse off financially whilst on leave or immediately afterwards and you should help towards safeguarding the business against the currently complex holiday pay landscape.