Protection for holiday pay claims as Supreme Court upholds landmark decision

The Supreme Court has ruled in favour of a tribunal that awarded over 3,700 staff at the Police Service of Northern Ireland (PSNI) holiday pay dating back to 1998, upheld in the Court of Appeals in 2019.

Under the Employment Rights Act 1996, workers whose holiday pay has been wrongfully deducted may link instances of underpayment dating back two years.

The ruling states that a gap of three months or more does not constitute a break in this chain of deductions. Therefore, workers can submit a single claim for all deducted holiday pay within a two-year period.

Previously, a gap of three months or more constituted a break in the chain of deduction, meaning that workers had to file a claim for each instance separately.

What does this mean for your business?

In practice, the ruling means that employees can reclaim underpayments over a longer period of time – provided there is a pattern of incorrectly calculating holiday pay – making it far easier to resolve unlawful deductions for up to two years.

As a result, businesses may now face large liabilities for unlawful deductions.

It all comes down to how you calculate holiday pay and deductions.

While some businesses are unlikely to face difficulties, the ruling could spell financial and legal trouble if you employ flexible workers or offer overtime payments.

Without the right expertise in your team, it’s easy to miscalculate holiday pay on non-standard contracts, variable hours or fluctuations in rate of pay.

In this case, PSNI faces the £40 million financial burden of an ongoing calculation error.

We can help you get it right.

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Investing in effective, professional HR services is a must, to keep your business protected as the law continues to change around flexible working. Please contact us to find out how we can help you do HR, the right way.