Holiday pay miscalculations – what are my rights?

Under EU law, workers in Great Britain are entitled to four weeks’ paid annual holiday. In addition to this, under domestic law, there is a right to a further 1.6 weeks’ leave. Workers in Northern Ireland have the same holiday entitlement, under the Working Time (Northern Ireland) Regulations 2016.

Over time, case law has determined that holiday pay for a worker’s first four weeks’ leave each year should be calculated as ‘normal pay’. In this context, ‘normal pay’ includes commission, overtime, regular allowances and is not limited to just basic pay.

What happens if I want to make a claim?

Where a worker thinks that their holiday pay has been wrongly calculated, they can bring a claim for unlawful deduction of wages and workers can claim for a series of deductions. In this instance, their claim would need to be lodged within three months of the last deduction in the series.

Where a worker is bringing a claim for a series of deductions, the Deduction from Wages (Limitation) Regulations 2014 prevents a worker from claiming sums that go back further than two years. This applies to claims brought on or after 1 July 2015.

Workers in Northern Ireland can bring claims of this kind under the Employment Rights (Northern Ireland) Order 1996. However, workers in Northern Ireland are not limited to a two-year period when looking at a series of deductions.

Previously, the Employment Appeal Tribunal had determined that, where there was a break of three months or more in a series of deductions, a worker would be prohibited from claiming for holiday pay prior to the break in deductions.

Supreme Court decision

In Chief Constable of the Police Service of Northern Ireland and another v Agnew and others [2023] UKSC 33, Police officers and civilian staff employed by the Police Service of Northern Ireland concluded that their holiday pay had been wrongly calculated, by using their basic pay rather than their ‘normal pay’. This led to them bringing claims for underpaid holiday pay dating back to 1998.

Not only was it found that they had been underpaid their holiday pay, in its Judgment in October 2023, the Supreme Court held that a three-month gap did not break a series of unlawful deductions from wages. This applies to any claim for underpayments that can be claimed in a series, not just holiday pay.

What does this mean for claims relating to holiday pay?

With this decision now making it much easier for workers to establish a series of deductions, employers may now potentially face higher value claims for unlawful deductions from wages.

Employers should therefore take particular care to ensure that they are calculating workers’ holiday entitlement correctly, especially in Northern Ireland, where claims lodged can go back to as far as when the Working Time Regulations came into force in 1998. Presently, in Great Britain however, the two-year backstop under the 2014 Regulations will still limit claims for holiday pay going back to a maximum of two years.

The wider impact may well result in further challenges from unions as to the legality of the 2014 Regulations and whether the UK government was entitled, under EU law, to limit holiday pay claims to two years.