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Backdated Holiday Pay Claims

Backdated Holiday Pay

Under current UK law certain categories of worker have their holiday pay calculated without taking account of any commission, shift allowance or overtime they might work. For some, these aspects are only taken into account if they are guaranteed by contract or are compulsory. For others, these aspects are included.

The European Court has decided that the European Directive which gives workers the right to paid holiday leave requires that workers should receive any supplements, such as for performing a role; allowances, which are intrinsic to their role or which reflect their status; and average commission earnings when they take their holiday. These decisions of the European Court have been used by workers to pursue claims through the Employment Tribunals in the UK, some of whom have decided that workers should be paid equivalent overtime earnings whilst they are on holiday.

The issue has yet to be finally settled, however, as a number of cases have been the subject of appeal to the Employment Appeal Tribunal. In the cases which remain the subject of appeal there is expected to be a decision issued by the Employment Appeal Tribunal during October. The potentially wide ranging impact of this decision cannot be understated.

If the Employment Appeal Tribunal determines that holiday pay should be calculated by reference to average pay (including the points raised above) there are number of issues which arise:-

Over what period should average pay be determined – traditionally a week’s wage would be calculated by reference to the earnings of the preceding 12 weeks

Are employers liable for backdated holiday pay?

How far back should employers’ liability extend? – this could be as far back as 1998 when the statutory right to paid holiday leave was introduced.

What time limits will apply to those who wish to pursue a claim for backdated pay? – the best advice is that claims should be submitted now although those are likely to be frozen by the Employment Tribunal until this issue is finally decided either by the UK courts or by referral to the European Court of Justice.

How should employers react? – it would be prudent for any employers who may be caught by this issue to review their contract terms / leave provisions both current and past to identify whether they need to change their current arrangements or make accounting / financial provision for liabilities which may arise.

Whatever arises over the course of the coming weeks it is important for employers and employees alike to consider their circumstances and take advice. Failure to take advice and action, in particular for employees, may result in them losing out in the ability to make any claim for backdated holiday pay. Contact our Partner, Robert Honeyman to arrange a consultation.

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