HUNDREDS of North-East jobs could be lost and companies face closure over holiday pay law, engineering and construction bosses have warned.

The North-East Civil Engineering Contractors’ Association (Ceca), say the impact of backdated holiday payments may deliver a catastrophic impact to firms' futures.

The warning comes as Ceca bosses take legal advice to interpret judges' findings in the wake of the EU's Working Time Directive and the UK’s Working Time Regulations.

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They say a European Court of Justice hearing held that, under EU law, workers taking statutory holiday are entitled to receive, besides basic salary, pay linked to performance of tasks under contract.

However, they argue confusion arises when staff work different hours depending on workload, earning variable overtime pay.

Another hearing held that in light of the EU law, overtime should be included when calculating holiday pay under UK legislation, even where overtime was voluntary.

Douglas Kell, Ceca director, said: “I’ve never known legislation with such catastrophic impacts in my 35 years in the industry.

“When workloads are so variable and where weather conditions have such a direct effect, overtime is an essential part of our business.

“The new interpretation of the law will mean each employee has a unique rate of holiday pay for each and every week of holiday, based upon their own average earnings for the previous 12 weeks.

“This has obvious implications for the cost of administering a payroll, and by the way the law works it opens employers up to claims for additional holiday pay backdated for six years.

“A number of our member firms in the North-East fear the consequences, with one estimating it could face paying out about £1.5m.

“It more than likely head to insolvency and the loss of jobs.”

Mr Kell said Ceca was advising the Department of Business Innovation and Skills about the potential cost to North-East businesses and subsequent workforce reductions.

Lawyers Paul Johnstone and Em Phillipson from Newcastle-based Muckle said companies are in a state of limbo, with businesses taking different interim responses.

Mr Johnstone added: “If the decision reached in one case is ratified, hourly paid workers will have a valid claim where holiday pay they receive doesn’t accurately reflect the full amount they’d normally receive at work.

“In many cases, backdated claims could follow which many companies will simply not be able to afford.”