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Employment lawHolidays and holiday payOvertime

Government puts two-year limit on backdated holiday pay claims

by Jo Faragher 19 Dec 2014
by Jo Faragher 19 Dec 2014

The Government has announced that holiday pay claims made since the recent landmark judgment on overtime will only be able to stretch back two years.

Employers expressed concern last month after the Employment Appeal Tribunal (EAT) ruled that holiday pay should reflect non-guaranteed overtime.

Since around one-sixth of the 30.8 million people in work receive some form of overtime, it was feared that around five million workers could be entitled to more holiday pay, and employment lawyers predicted a slew of backdated claims.

Announcing its decision to limit backdated claims to two years, the Department for Business, Innovation and Skills said: “The Government recognises the decision of the court and is today taking action to protect UK business from the potentially damaging impact of large backdated claims.”

XpertHR resources

Holiday pay: the EAT decision that overtime should be included examined

Contract clause on holiday pay for employees

Podcast: holiday pay

Workers will still be able to make claims under the existing arrangements for the next six months, which will act as a transition period before the new rules come into force. This means the changes will apply to claims made on or after 1 July 2015.

Glenn Hayes, employment partner at Irwin Mitchell, said he was surprised that the Government had responded so quickly on this issue.

He added: “It will be interesting to see how it will feed into the case next year on the issue of whether commission payments should be included in holiday pay.

“Despite the early response, there are a number of unanswered questions in relation to whether claims can be calculated over a reference period of the previous 12 weeks prior to the overtime being taken such as in the UK, or over the previous 12 months.”

After the recent ruling, the Government also set up a taskforce of representatives to assess the financial exposure employers face and how to limit the impact on businesses.

Jo Faragher
Jo Faragher

Jo Faragher has been an employment and business journalist for 20 years. She regularly contributes to Personnel Today and writes features for a number of national business and membership magazines. She won the Willis Towers Watson HR journalist of the year award in 2015 and has been highly commended twice.

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