Government takes action to deal with holiday pay uncertainty

The government has taken decisive action to deal with the current uncertainty regarding holiday pay claims with the announcement of a Statutory Instrument, the 'Deduction from Wages (Limitation) Regulations 2014', which will create a two year backstop on retrospective claims for unlawful deductions for holiday pay. The two year limit will apply from the date a claim is submitted to the Tribunal.

The two year limitation will apply to claims filed on or after 1 July 2015. In the meantime, there will effectively be a six month window for unlimited claims.

The two year back-stop will limit liabilities for employers where individuals do not have a three month gap between unlawful deductions, and if future claims challenge the validity of the decision that a three month gap breaks the series of deductions.

The government’s taskforce will continue to consider the implications of the holiday pay decisions on business.

The case of Lock v British Gas Trading Limited is also expected to be heard on 4 February 2015. Back in May 2014, the Court of Justice of the European Union (CJEU) held in this case that commission payments do fall within the concept of normal pay and therefore employers should take commission payments into account when calculating a worker’s holiday pay. Lock is returning to the Tribunal to consider if domestic legislation can be interpreted in line with the decision in Williams & Others v British Airways and if it can, the level of holiday pay to which the employee was entitled. We shall continue to keep a watchful eye on holiday pay developments and will be tweeting live from the hearing in February.

For an up to date analysis of the holiday pay cases read our Executive report and visit our holiday pay hub on our dedicated website for HR professionals: »

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.


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Andrew Chamberlain

Partner - Head of Employment & Chair of the SDE

I am a Partner, the National Head of the Employment Team and the Chair of the Service Delivery Executive (SDE), which is focused on building better solutions for clients.

Hannah Robbins

Partner - Head of Healthcare

I am a very experienced employment lawyer and advocate in tribunal. I act on the full range of contentious and non-contentious employment issues.

Judith Firth

Associate - PSL - client facing

I am an Associate and Professional Support Lawyer for the Employment team.