23 December 2014

Following on from last week’s news story Holiday pay ruling back under the spotlight, Richard Smith, Croner Head of HR at Wolters Kluwer, looks at recent employment law developments and what impact these will have on UK businesses.

The prospect for significant back pay claims has now receded since the introduction of the Deduction from Wages (Limitation) Regulations 2014. The regulations will limit all unlawful deductions claims to two years before the date the ET1 is lodged; and, they explicitly state that the right to paid holiday is not incorporated as a term in employment contracts. However, there may be a challenge to these regulations.

Employers that reach July 2015 with no claims brought against them should be able to limit any scope for back pay. In every case, a detailed assessment on the merits should be undertaken as there may not have been a “series of deductions” — and/or the last “deduction” may have fallen more than three months prior to the claim being submitted, and so time may have run out to make a claim. In particular, where the employer has changed payments to be in line with Bear Scotland and no claim has been presented, the employee will have limited opportunity to make a back pay claim.

With the implementation of FRS 102 in 2015, employers will be obliged to show liabilities for outstanding holiday pay within their accounts and will need to take a view on potential liability for these types of claims in so doing.