Compared to the rest of the UK, historic underpayments of annual leave are dealt with differently in Northern Ireland. A new court case seeks to disrupt the law and bring unity to the UK. See our analysis of the situation below.
Why may I have historically underpaid holiday?
There are several reasons why historic holiday pay may have fallen short of the regulations, a few include:
- You have historically operated (or are operating) a 12.07% scheme
- You have not included overtime payments into holiday pay
- You have used a rolled up holiday scheme in the past
Can employees claim back underpaid holiday
In England, Wales and Scotland
Yes, but workers are limited to a chain of claims with less than 3 month gaps between underpaid holidays. For example, assuming it is December, if a worker took holidays in November, September and February; they could claim the underpayment for November and September, but not February, as there is a larger than 3 month gap between September and February. Once the chain is broken, you cannot go back any further, so they could not then claim January.
There is also a separate rule statutory rule limiting claims to 2 years. This means that even if you could link back claims for 3 years with less than 3 month gaps, you are capped at 2 years. This is referred to as the backstop.
In Northern Ireland
Yes, a worker can claim back underpaid holiday, currently there is no 3 month rule and no 2 year backstop. Theoretically, this means a worker could bring retrospective claims for underpaid holidays from 1998 until the present day; or even 1996 by some readings.
What is changing?
This is where it becomes more complicated. The Northern Irish law which allows workers to claim underpaid holiday without reference to the ‘3 month rule’, is being tested in the UK Supreme Court. The UK Supreme Court’s ruling, which is likely to be released in the next 3-6 months will apply to the whole of the UK. This leaves several possible outcomes, either:
- England, Wales and Scotland will adopt the Northern Irish method – no 3 month rule
- Northern Ireland will adopt the 3 month rule
- A bespoke position is found by the court – essentially a new law is made for all of the countries
In any case, it is extremely unlikely that the 2 year backstop will be removed for England, Wales and Scotland.
In a nutshell, this means that if the Supreme Court find as expected, they will abolish the 3 month rule for England, Wales and Scotland; leaving employers open to claims for the full 2 year period, without further limitation.