Back pay for holiday limited to two years

For claims issues on or after 1 July 2015, under the Deduction from Wages (Limitation) Regulations 2014, back-dated claims for underpayment of holiday pay will be limited to two years.

The Regulations also amend the Working Time Regulations 1998 so that the right to be paid a ‘week’s wages for a week’s holiday’ is a statutory right only, not a contractual right.  The practical effect of this change is that holiday pay claims can only be brought as statutory claims in the employment tribunals, not as breach of contract claims in the civil courts (where the limitation period would be six years in England & Wales and five years in Scotland).

For claims issued prior to 1 July 2015 there will be no statutory limit so employers may see an increased number of claims in the run up with employee’s attempting to avoid this cut-off.

This legislation has been introduced to restrict the effect for organisations of the Bear case.  In our view the bear case is more restrictive because of the limiting effect of the judgment in relation to when a series of deductions is broken.