New rules for holiday pay in the UK could cost employers more
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Changes to the way in which holiday pay is calculated in the UK will bring additional expense to many employers in 2015. Under the Working Time Regulations 1998, all UK employees are entitled to 28 days’ paid holiday per annum, of which 20 days are required under EU Law. Previously, holiday pay for most employees was based on salary only. Following a ruling by the UK Employment Appeals Tribunal in 2014, the 20 days’ holiday required under EU Law must now be calculated according to an employee’s ‘normal remuneration’. ‘Normal remuneration’ is defined as the pay which an individual ‘normally receives’ and can include commission, allowances, non-guaranteed overtime, call out payments, temporary supplements or bonuses. As well as the additional expense going forward, employers may also be subject to historic claims from employees who believe they have been underpaid for their holidays in the past. If a series of underpayments can be established, such claims may prove costly. If no such series can be established, claims can only be made in respect of holiday pay received in the last three months. To limit the effect of the ruling, the UK government will introduce the Deduction from Wages (Limitation) Regulations 2014, which will limit to two years any claims for a series of underpayments of holiday pay that are received on or after 1 July 2015. To avoid any future liability, it is important that employers check their holiday pay procedures and ensure that holiday pay is based on ‘normal remuneration’ from 2015. Resources Further information For further information or to discuss any of the issues raised, please contact Sophie White at Abbiss Cadres on (+44) 203 051 5711. Disclaimer Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this article. For further legal information see our legal page. Circular 230 disclosure To ensure compliance with requirements imposed by the IRS and other taxing authorities, we inform you that any tax advice contained in this article (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Copying If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.