Holiday Pay Update

Following on from the well publicised case of Bear Scotland and others v Fulton and others, the Government have set up a ‘taskforce,’ in order to limit the impact of the EAT’s decision.

You may recall that in this particular case, the EAT confirmed that holiday pay should indeed include non-guaranteed overtime. This case has also opened up discussion regarding the question of what does, or should constitute ‘normal pay.’ Traditionally in the UK, holiday pay has been calculated based upon ‘basic pay.’ This has now, however been highlighted as a misinterpretation of European law.

One of the reasons that this case gathered such widespread attention, was the concern amongst employers about the potential for backdated claims. Employers were concerned that had they failed to include non-guaranteed overtime when calculating holiday pay; this would now be defined as an unlawful deduction of wages. It was thought that this decision could lead to claims being backdated as far as 1998 when the Working Time Regulations were introduced. Nonetheless some solace could be found in the decision that such claims could only go back as far as the last interval of three months between underpayments related to holiday.

So what’s new?

What’s new is that the taskforce mentioned above, has announced that a cap of two years will be set with regards to unlawful deduction from wages claims in relation to holiday pay. The Government has introduced regulations to this effect which will be good news for employers, and the will take effect for claim lodged on or after July 2015.

The official announcement stated that;

“The Government recognises the decision of the court and is today taking action to protect UK business from the potentially damaging impact of large backdated claims. Changes made to regulations under the Employment Rights Act 1996 will mean that claims to employment tribunals on this issue cannot stretch back further than two years.”

Whilst every effort has been made to maintain accuracy throughout this article, Nationwide Employment Lawyers cannot accept responsibility or liability for any errors. This article is intended for guidance purposes  only and does not constitute specialist legal advice. Nationwide Employment Lawyers accept no responsibility or liability whatsoever for any action taken or not taken in relation to this article and recommend that appropriate legal advice be taken in all circumstances.