We recently commented on the UK Employment Appeal Tribunal case of Bear Scotland v Fulton (“the EAT case”) which ruled that holiday pay should also include payments in respect of non-guaranteed over time.

What was not clear from the EAT Case was whether UK businesses will be liable for back-dated holiday pay claims brought by workers. If UK businesses were found to be liable then this would have opened the floodgates for approximately 5 million workers to bring claims against their employers for more holiday pay. The effect of this was likely to be financially devastating for UK businesses, particularly small businesses. Consequently, the Federation of Small Business urged the government to bring in emergency legislation to prevent the possibility of backdated claims.

Yesterday, the government took action and made changes to the Employment Rights Act 1996 preventing back-dated holiday pay claims from stretching back further than 2 years.

The new rules will come into force on 1 July 2015. In the meantime, workers will still be able to make claims for back-dated holiday pay stretching back further than 2 years.

Whilst the new rules do not prevent back-dated claims in their entirety, they do at least provide some certainty to both employers and workers. The new rules will also help reduce the value of such claims, thereby easing the financial burden on businesses.

For more information on how this may affect your business, please contact a member of our Employment team.