Newsflash: Holiday pay claims – government action

holiday pay - deck chairWhat do we already know?

We updated you in our Newsflash Big News: Holiday Pay and Overtime and in our November Newsletter Case update (1) – holiday pay and news on the EAT’s recent and very well publicised decision of Bear Scotland Ltd and others v Fulton and others that holiday pay should be based on normal pay rather than just on basic pay and so holiday pay should be calculated to include non-guaranteed overtime.

These decisions potentially left employers exposed to unlawful deduction from wages claims for a series of holiday pay underpayments going back to the introduction of the Working Time Regulations in 1998. However, an important and welcome aspect of the decision in Bear Scotland Ltd and others v Fulton and others was that an interval of more than three months between underpayments in such a series will “break the chain” of the series and prevent the claim from reaching back prior to that break.

Further welcome news for employers was that the Government set up a “taskforce” to assess how the impact of the above decision on businesses could be limited.

What is new?

Good news – the Government has announced that it will impose a cap of two years on unlawful deduction from wages claims in respect of holiday pay and has introduced regulations in this respect. However, the cap will only take effect for claims lodged on or after 1 July 2015. Therefore, although good news for employers overall, the Government’s announcement may lead to an increase in claims in the short-term in order to get in before the 1 July 2015 changes.

While the Government discussed these changes with the taskforce set up to limit the impact of the EAT’s decision, they do not represent a direct output of the taskforce’s work. The taskforce continues to work through the implications, so there may be further good news to come, so watch this space…

If you do receive a claim then and you would like our help in responding to this please do not hesitate to contact Luke Menzies at or 0845 113 0150 or any other member of the team.