Holiday Pay Updates

We recently reported on recent important decisions on holiday pay in the Employment Appeals Tribunal which held that non-guaranteed overtime must be taken into account in calculating holiday pay.

One concern for employers at the time of the Judgment was the potential for employees to go back a number of years in claiming holiday pay, where they could sustain an argument that there had been a “series of deductions”.

In an attempt to alleviate concerns of many employers, the Government has recently announced that the Deduction from Wages (limitation) Regulations 2014 which came into force on 8 January 2015, will apply to claims presented on or after 1 July 2015.

Importantly, the Regulations will impose a two year limitation period on most unlawful deductions from wages claims.  This is not simply limited to claims for holiday pay, but will also include payment such as commission, bonuses and fees; although it will exclude certain types of remuneration such as Statutory Sick Pay and Statutory Maternity Pay.

A further change brought about by the Regulations is designed to ensure that holiday pay claims cannot be brought in the Civil Courts as an alternative to the Employment Tribunal.  With effect from July 2015 therefore the scope for employees to bring historic claims arising from payments allegedly due under the contract of employment will be severely limited.