Latest update on the long running holiday pay debate

The Deduction from Wages (Limitation) Regulations 2014 now limits the time for employees wishing to backdate claims for underpaid holiday pay, to a period of two years. This applies only to new cases raised on or after 1 July and means that claims for underpaid holiday pay will not be allowed where the date of the payment in question was more than two years before the date the Tribunal claim was raised. These Regulations come out of the decision in Bear Scotland which decided that non-guaranteed overtime payments should be included in holiday pay calculations and that claims would be time barred where there was a break of more than three months between the successive underpayments. This severely limited employees’ entitlement to claim any backdated unpaid sums.

There is expected to be a slight peak in claims to the Employment Tribunal as employees rushed to submit in time for the deadline but interestingly, this issue has not resulted in the huge numbers of claims which was originally predicted by the Unions. According to recent figures issued by the Employment Tribunal in Scotland, there are just under 21,000 claims lodged for holiday pay in Scotland involving around 321 employers. The Employment Tribunal has recognised that the law has not ever been straightforward in this area and that it continues to be shrouded in confusion.

The approach being taken by the Employment Tribunal is to “sist” (freeze) cases to allow time for the law to develop as it awaits decisions from the Employment Appeal Tribunal which can then be applied to the cases that have been raised.

We will continue to keep readers in touch with the way in which the law develops in this important and potentially costly area.

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