A new Supreme Court decision now means that three-month gaps no longer prevent or limit the extent of claims. Tribunals will now look for a ‘common reason’ for underpayments (such as applying the incorrect formula for calculating holiday pay) to determine whether deductions are part of a linked series. This decision is important for employees who work overtime or are paid commission where holiday pay can often be difficult to calculate and claims can be common.
Practical takeaways
Holiday pay audit – if you think you may be open to challenge for how you’ve historically calculated and paid holiday pay, auditing your records will give you a clear picture of your potential exposure for an unlawful deductions claim and help inform your next steps.
Time limit to bring a claim – any claim must still be brought within three months of the last deduction. In England, Scotland and Wales any back pay can only go back two years, whereas it can go back to 1998 for those in Northern Ireland.
Get it right from now – ensuring you’re calculating holiday pay correctly in light of this decision (including regular overtime and commission etc.) will mean that you can effectively start the three-month ‘count down’ now. Ensuring employees are receiving the correct payments could reduce any appetite to litigate for holiday back pay.
