New Regulations on Holiday Pay

Posted 22/12/2014

The Government has released a press release entitled “Government tackles businesses’ concerns over holiday pay ruling” (18^th December 2014).

This follows the judgment of the EAT last month in Bear Scotland v Fulton in which it was held that non-guaranteed overtime should be included in the calculation of holiday pay – Link here. In the same judgment, it was suggested that employees would be within their rights to bring historic claims for unpaid non-guaranteed overtime as an unlawful deductions from wages claim. However, for a series of deductions to be established, there must not be any more than a three month break in the underpayments.

Following this judgment, the government set up a taskforce, determined to take action to protect businesses from large backdated claims. The Deduction from Wages (Limitation) Regulations 2014 will operate to limit all unlawful deductions claims to 2 years before the date the ET1 is lodged (with certain exceptions). The Regulations also state explicitly that the right to paid holiday is not incorporated as a term in employment contracts.

The effect of these Regulations are to remove the chance that employees can bring years worth of historic underpayment claims against their employers. However, the Regulations will not apply until 1^st July 2015, and therefore if employees wish to take advantage of the current rules that allow for complete historic claims, they will need to get their claims into the tribunal before this date.

If you require any further assistance on the rules surrounding holiday pay, please do not hesitate to contact a member of our Employment team.

You can find the new Regulations here: http://www.legislation.gov.uk/uksi/2014/3322/pdfs/uksi_20143322_en.pdf