Holiday pay and overtime update

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In response to the recent Bear Scotland decision by the Employment Appeal Tribunal on backdated holiday the government has released the Deduction from Wages (Limitation) Regulations 2014. Not the most dynamic title but it does have important implications for both employers and employees. For those not familiar with the Bear Scotland decision my previous summary can be found here: Legal brief: holiday pay. However, in a nutshell, the decision stated that regular overtime should be taken into account when calculating an employee’s holiday pay. The court also held that were an employee has been regularly underpaid their holiday then they can claim backdated pay so long as the individual deductions were not separated by more than 3 months.

This decision led to many theories and discussions regarding how long an unbroken chain of underpaid holiday could go back. Some discussion was had to suggest that it could be 6 years (the limit on a contractual breach claim). There were even suggestions that an employee could claim all the way back to 1998 (the year the Working Time Regulations came into force). The debate has now been settled (subject to any legal challenges) by these new regulations. These allow claims to be backdated up to a maximum amount of 2 years from the date of the presentation of the complaint; this decision applies to both Employment Tribunal and County Court claims.

This is a piece of good news for employers who have been concerned about the implications of the Bear Scotland decision especially since the government seem to have been fairly conservative in their approach to this issue. One point to note however is that these regulations only apply to claims presented on or after 1 July 2015, it is therefore possible for employees to submit their claims in the hope that they could backdate their holiday pay further than the regulations allow.


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