A limit to holiday pay claims

New regulations limit backdated claims

We’ve got a new set of regulations which take care of what, for some employers, was the worrying possibility of facing large, backdated holiday pay claims.

The Deduction from Wages (Limitation) Regulations 2014 limits holiday pay claims to two years before the date of the ET1 claim form. The Regulations apply to all unlawful deductions claims, with some exceptions – claims for SMP, SSP and guarantee payments, for example. The Regulations also make clear that the right to holiday pay is not incorporated as a term in employment contracts

They come in the wake of Bear Scotland v Fulton which decided that compulsory non-guaranteed overtime should be included in holiday pay calculations. Although the case put in place some important restrictions on claims, there are concerns that it might be overturned. But by limiting in legislation the extent of claims to a two-year period, the Regulations should provide some comfort to employers.

While it may be breathe-a-sigh-of-relief time, a word of caution: there is currently a window of opportunity for astute employees to take advantage of a brief transitional period. The Regulations only apply to ET1s presented on or after 1 July 2015. So there is some potential for claims, stretching back longer than two years, to be issued now. Claimants would however need to clear the hurdles put in place by Bear Scotland and show a series of deductions, which isn’t as easy as it sounds.