Holiday pay claim deductions

The Supreme Court has recently handed down its judgment in the case of Chief Constable of Police Service of Northern Ireland v Agnew. 

The claimants were police officers and civilian staff working for the police in Northern Ireland. They brought claims for underpayment of holiday pay after having historically received basic pay only during periods of annual leave. The parties agreed that there had been an underpayment and that holiday pay should have been calculated to include periods of compulsory overtime. The issue before the Supreme Court was how far back the claimants were entitled to go with their claim.

In Bear Scotland v Fulton, the EAT had previously concluded that deductions could only be linked in a series if there was a gap of three months or less between each deduction.

But the Supreme Court has now held that employees can claim for historic underpayments of holiday pay even if there are gaps of more than three months between deductions. The court concluded that the period during which a claim can be brought is three months from the date the last underpayment was made, but that this three-month limit does not restrict or qualify the meaning of a “series” of deductions.

From an employer’s perspective, it’s important to remember that the impact of this judgment is mitigated by the fact that claims for unlawful deductions from wages under the Employment Rights Act 1996 can now only go back two years.