Significant Development In Holiday Pay Claims In The UK ' What Employers Need To Know

• Law Firm: Withers LLP
• Subject Matter: Employment and HR, Employment Litigation/ Tribunals, Employee Rights/ Labour Relations
• Author: Ms Meriel Schindler, Hugh More, Claire Christy, Libby Payne, James Hockin and Christina Morton
• Published date: 30 October 2023

The Supreme Court has delivered a significant judgment for employers on holiday pay that may give rise to claims for backdated holiday pay by employees and workers (Chief Constable of the Police Service of Northern Ireland and another v Agnew and others).

Holiday pay is notoriously complex and has generated a large number of important decisions from the Court of Appeal and the Supreme Court. Although individual claims are generally modest, if an employer has been using the wrong calculation for holiday pay across the whole workforce, rectifying the problem can be very expensive.

Holiday pay claims are most often brought as claims for deductions from wages as this potentially allows employees who have been underpaid holiday pay over a period of time to claim back for a period of two years, or, if earlier, the point at which the wrong payments began. In theory, if the employee can show that the employer has made a series of deductions that are linked together in a chain, the claim can be made for the whole period, not just the most recent underpayment.

Since 2016 and a case called Bear Scotland v Fulton, it has been accepted that in cases where there has been a chain of deductions, but there is a gap of more than three months between dates on which the wrong amounts are paid, that gap breaks the chain and prevents the employee claiming for sums that arose before the date of the 'break'. The Supreme Court in the Agnew case has now said that that is the wrong approach and tribunals...