Compensating Staff for Underpayment of Holiday Pay

Oct 30, 2015
Following the landmark employment law cases over the last year, there is much uncertainty amongst employers in respect of retrospective holiday pay claims and holiday pay obligations moving forward. 

It is now established that non-guaranteed overtime and commission payments must be taken into account when calculating holiday pay. 

The scope of retrospective claims has been somewhat limited. The Employment Appeal Tribunal (EAT) has barred employees from bringing claims for unlawful deductions from wages where there is a gap of more than three months between deductions. In addition, the government has introduced the Deduction from Wages (Limitation) Regulations 2014 as of 1 July 2015 which imposes a two year backstop period for unlawful deductions from wages claims.

However, going forward neither of the key judgments establishing the new rules on holiday pay have tackled the issue of the correct reference period to be used when calculating holiday pay. There has been no judicial comment as to whether reference to the previous 12 weeks as propounded by the Employment Rights Act 1996 is appropriate.

The key case on commission and holiday pay is still under appeal and many employers are awaiting the outcome before considering new holiday pay calculations. In contrast, some employers have chosen to act now. It was recently announced that Easyjet has agreed to include commission payments in holiday pay for its 2,500 strong cabin crew following pressure after a ballot of 2,000 members of Unite the union. 

Darren Hayward

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Darren Hayward

Darren joined Nockolds in 2003 and is the firm’s Managing Partner and Partner in charge of our Employment Law Team. 
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