Holiday Pay Rules – a legal update

GALogosmallIn November2014, the Employment Appeal Tribunal ruled that employees’ holiday pay should include overtime and that employers would need to calculate the actual weekly earnings of each employee.
Following this landmark decision (in the case of Bear Scotland Limited), the government is changing the law to limit the adverse effect for employers.

The Employment Tribunal originally ruled that overtime should be included when calculating the amount of an employee’s holiday pay. When the judgment was released there were fears that the decision could mean that employees, whose previous annual leave did not contain an overtime element, could issue unlawful deduction of wages claim stretching back numerous years.
The law will change so that a series of unlawful deduction of wages can only go back a maximum of two years. The last in the series of the deductions must still be within three months of an employee presenting a claim to the Employment Tribunal.

The government has also made changes so that employees are only able to present claims for holiday pay claims in the Employment Tribunal and not the civil courts.
This will come as welcome news to employers. However, the new law will only apply to claims brought after 1 July 2015 so there is still time for employees to bring backdated claims going back more than two years.

If you are concerned about any potential liabilities, or receive a claim against your business for long term holiday pay, please contact either Rhiain Lewis (01752 513532/ or Rob Zacal (01752 513549/ and they will be able to help.


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