Can employees claim for historic underpayments of holiday pay even if there are gaps of more than three months between deductions?

Yes, held the Supreme Court in its long-awaited Judgment published on 4 October 2023 in Chief Constable of Police Service of Northern Ireland v Agnew. In a previous EAT decision it had been concluded that deductions could only be linked in a series (relevant for calculating if a claim is in time or not) if there was a gap of three months or less between each deduction. However now the Supreme Court in Agnew has confirmed that, broadly speaking, employees should be able to link each deduction and that the time limit is three months from the date the last incorrect payment was made. It should be remembered that the impact of this judgment is reduced by the fact that claims for unlawful deductions from wages can only go back for a maximum period of two years (although commentators suggest that the two year backstop is likely to be challenged).

But the key message here is make sure you are calculating your holiday pay correctly. It isn’t a simple science, variable pay, overtime, commission, bonuses all need to be considered. It isn’t always as easy as stipulating that holiday pay is based on basic pay only.

As always if you are in doubt about how to calculate holiday pay and whether you have a risk of historic claims for your workforce speak to a member of the CG Employment team.