UK Government Takes Steps to Limit Claims for Backdated Holiday Pay

    View Authors December 2014

    The UK Government has published draft regulations to limit claims for unlawful deductions from wages to two years. This legislation is being introduced with the aim of reducing the potential costs to employers in light of recent cases on holiday pay, although the cut-off covers other deductions and not just alleged underpayments for holiday.

    The Regulations will amend the Employment Rights Act 1996 so that Tribunals will only be able to consider deductions from wages claims where the deduction was made within the two years before the worker brought his claim, i.e. there will be a two-year cap on claims for backdated holiday pay. These changes will only apply to claims presented on or after 1 July 2015. Anyone planning a claim for a more extended period of arrears therefore has ample time in which to make it, thereby rendering this amendment largely ineffective in its objective.

    The Regulations will also amend the Working Time Regulations 1998 to make it clear that workers do not have a contractual right to receive statutory holiday, thus preventing them from bringing breach of contract claims in the event of underpayment. These changes will take effect from 8 January 2015.

    These proposed changes do not alter the fact that in order to be able to bring an unlawful deduction from wages claim for underpayment of holiday pay, workers will still have to bring their claim within three months of the alleged underpayment and any break of three months between payments could still break the chain, as per the EAT’s comments in Bear Scotland Ltd v Fulton & anor.

    You can view the full press release on the gov.uk website.