John Lewis makes one-off payment following overtime and holiday pay ruling

The John Lewis Partnership will pay out £10m to workers following a change in the law which made employers take into account paid overtime when calculating holiday pay.

The announcement comes after an Employment Appeal Tribunal ruling in November 2014. John Lewis, which runs Waitrose and John Lewis stores, will take paid overtime into account when calculating holiday pay for Partners [John Lewis workers are all partners] from February. In addition, a one-off back payment will be made, where applicable, for holidays taken since 1 November 2014 to cover the period between the ruling and February.

John Lewis says the cost of these changes will be around £12 million annually (including pension, bonus and employer’s National Insurance contributions), which represents less than 1% of the total annual payroll costs. It says the majority of these costs will be incurred in Waitrose where paid overtime is more usual than in John Lewis. The one-off £10 million payment comprises around £3 million for the back payment and around £7 million to recognise an increase in pension liabilities.

Tracey Killen, the Partnership’s Director of Personnel, said: “The John Lewis Partnership has acted promptly to change its pay practices in response to the Employment Appeal Tribunal ruling. We believe our approach is a fair and practical outcome for our Partners in light of this decision.”

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