We bring some good news for employers to start the year… yes we know that doesn’t happen often!
Following on from recent tribunal rulings about the need to now include commission and most overtime when calculating holiday pay, on December 18 2014, the Government introduced regulations that will limit the maximum amount of back dated holiday pay ‘underpayments’ that an employee can claim.
These regulations will amend the Employment Rights Act 1996. They come into force on 1 July 2015.
What this means for employers is that if employees wish to make a claim for backdated pay relating to underpayments of holiday pay – for example if an employer did not previously include overtime when calculating holiday pay – this claim will be limited to a series of periods of holiday with less than 3 months break between them and limited to the last 2 years only.
We remind you of course that the cases that led to the ruling on overtime being included in holiday pay calculations is now being referred to the Court of Appeal and so a final decision on the matter is still months away. This does mean that employers do still currently have the choice to take no action with regard to including overtime in holiday pay calculations. It seems likely, however, that this ruling will be upheld and so any delay in starting to include overtime in holiday pay calculations may potentially result in a greater number of tribunal claims, albeit with the limit of any claims being restricted to 2 yeas backdated pay.
If your have employees working any overtime, other than truly voluntary overtime, give us a call to discuss the best way forward for your business.