Holiday pay update

The Supreme Court has recently made a ruling that will make it easier for employees to reclaim unlawful deductions from their holiday pay. The court found that the unlawful payment of a group of employees who lodged a joint action was linked by the same error: the claimants’ holiday pay had been calculated based on basic pay only, without considering their ‘normal’ remuneration, which included overtime.

This decision will have the greatest impact on employers that rely on overtime and commission payments, for example in recruitment or sales related roles.

Where overtime and commission have not correctly been included in the calculation of holiday pay, employers will no longer be able to ‘break’ the chain of underpayments by making a correctly calculated payment. Nor will employees be penalised if they have a gap of more than three months between periods of annual leave. Prior to this latest ruling, a ‘series’ of unlawful deductions made from an employee’s holiday pay was broken by a period of three months or more.

Employment law still limits the amount of time for employees to make a claim however. Any unlawful deduction claims for holiday pay need to be made within three months of the last time a pay deduction was made.  It should be noted that claims for unlawful deduction of wages can only go back two years, regardless of the length of the series of deductions.

One of the few areas where the government has said it intends to deviate from EU law is around holiday pay. 121 HR Solutions will keep their clients up to date on any future changes in legislation relating to EU law – to find out more on our services visit www.121hrsolutions.co.uk