Change to holiday pay claims

Changes to holiday pay claims came into effect on 1 July. Staff can now only claim unpaid wages for up to two years.

The change to unlawful deductions from wages law was introduced in January to address concerns that recent holiday pay cases would lead to a flood of backdated claims for unpaid holiday pay. The government took the decision following the Employment Appeal Tribunal (EAT) judgment in November 2014 in Bear Scotland Ltd and others v Fulton and others; Hertel (UK) Ltd v Woods and others; Amec Group Ltd v Law and others.

Commenting on the changes, Dr Adam Marshall of the BCC said:

“The disappointing ruling of the Employment Appeal Tribunal last year, which said that firms needed to include overtime in holiday pay calculations, opened the door to backdated claims that could have run into the millions.  We pushed hard for a two-year backstop for holiday pay claims, which limits the backdated claims that companies may have to pay. However, there is still significant uncertainty for businesses when it comes to devising holiday pay policies.”

“Firms want further clarity from the Government on the new rules, and reassurance that the new requirements will be implemented in a fair and proportionate manner. More broadly, we are concerned by the growing number of rulings – both here in the UK and in the European courts – that are steadily expanding the definition of holiday pay. These changes create huge risks for businesses, and could deter some from expanding and creating jobs.”