In recent months media coverage has brought to employer’s attention the possibility of having to pay large amounts of back-dated holiday pay to staff who regularly receive paid overtime.
Holiday pay is generally calculated according to an employee’s contracted salary, which has traditionally not included overtime payments. However, a recent Employment Tribunal determined that both guaranteed and non-guaranteed overtime should be included in the sum of the salary on which holiday pay is based. The tribunal also concluded that employees could make back-dated claims for any unpaid holiday pay too.
In response, the Government changed the 1998 Working Time Regulations, stating that paid holiday isn’t a contractual right and any underpayments of holiday pay can’t be pursued as a breach of contract in the civil courts.
As a further precaution, regulations have been made to limit the amount of underpaid holiday pay employers may be liable for. From 1 July 2015 the new guidelines will limit claims of underpaid holiday pay to a two-year period. Without this change, claimants could request underpayments of holiday pay – where commission and non-guaranteed overtime had not been included – for up to 16 years, dating back to the creation of the Working Time Regulations in 1998.
If you do receive a claim, we recommend that you speak to a legal advisor as soon as possible. For any queries about your payroll, please get in touch with us by calling 01782 279615.