Two Year Cap On Backdated Holiday Pay Claims

As from today (1st July) a two year cap will be placed on all backdated holiday pay claims – much to the relief of employers!

An employee can make a claim to an Employment Tribunal if their holiday pay didn’t include all elements of pay they normally receive when they are working (for example commission or overtime payments). Some employers ignored these “additional” payments when calculating holiday pay.

The rules state that:

  • Any claim must be brought within three months of a single underpayment.
  • A claim that is made for several underpayments going back over a period of time must be made within three months of the last underpayment in the series.
  • To claim for several underpayments there mustn’t be a gap of more than three months between any two underpayments within the series.

And from today, employees can only claim 2 years underpayment. Many employees will argue that this is unfair as, if they’ve been underpaid why should they be prevented from recovering all their historical losses? Employers will argue that a cap is sensible because it means they can crystallise any backdated payments and not cripple their business.

As with most employment related law issues the fairness or otherwise of the rule will be judged by which side of the employment fence you happen to sit.