No need to panic
There has been some panic whipped up in the media about employers having to pay large sums of back-dated holiday pay to workers who regularly get paid for overtime.
In general holiday pay is calculated according to an employee’s “normal pay”, which has always been judged not to include overtime payments. However, in a recent Employment Tribunal the judge decided that guaranteed and non-guaranteed overtime should be included in the sum of “normal pay” on which holiday pay is based. The tribunal also determined that employees could make back-dated claims for unpaid holiday pay.
In response to this ruling the Government has changed the Working Time Regulations, so that paid holiday is not a contractual right and any underpayments of holiday pay cannot be pursued as a breach of contract in the civil courts.
Also from 1 July 2015 new regulations will limit claims of underpaid holiday pay to those amounts relating to a period of two years. There will be a six month transition period to allow claims for longer periods to be submitted where the claimant makes a claim within three months of the last perceived incorrect holiday payment.
So don’t panic. Any demands for unpaid holiday pay are now capped, and have to be brought within a restricted period.