Employment Law – Holiday Pay: An Important Update

Under the Employment Rights Act 1996, claims for underpayments must be brought before the end of three months beginning with the date of payment of wages from which the deduction was made, or, if the deduction was part of a series, within three months of the last in the series of deductions.

In a recent judgment of the Supreme Court* it was held that a series of deductions would not automatically be broken by a gap of three months or more. In this case, police officers and other employees were successful in claiming historic underpayments of holiday pay even though there were gaps of more than 3 months between deductions.

What this means for businesses? 

It is important to ensure that workers’ holiday pay is calculated correctly, particularly as now, in light of the decision of this case,  there is a substantial increase in liability for organisations for historical underpayments of holiday pay. Whereas before, gaps of 3 months plus could break liability for a series of holiday non/underpayments, that may not always be the case going forward.

There is often some uncertainty in calculating holiday pay especially when it comes to atypical workers – please feel free to make use of our FREE guide that you may find useful in calculating holiday pay for atypical workers! If you require further guidance on this topic or any employment-related questions, please feel free to contact our employment team.

* Chief Constable of Northern Ireland v Agnew