Supreme Court closes ‘loophole’, paving the way for flexible workers to claim thousands in backdated holiday pay from employer
Umbrella company compliance expert, PayePass, has responded to a Supreme Court ruling (4th October) which could see hundreds of thousands of flexible workers in the UK able to claim back-dated holiday pay from their employer.
This case saw more than 3,700 police officers and civilian staff successfully claim backdated holiday pay from their employer, the Police Service of Northern Ireland (PSNI), which is deemed to have underpaid holiday pay to these workers dating back to 1998.
In 2019, the Court of Appeal upheld a tribunal that found these workers were owed holiday pay. The PSNI appealed this decision, which has now been thrown out by the Supreme Court.
The case could cost the PSNI between £30m to £40m in backdated holiday pay claims, given in Northern Ireland claims are able to date back beyond two years, which is the limit in the UK. More details can be found on the BBC here.
The ruling means that a gap of three months or more between underpayments of holiday pay does not break the chain of deductions – previously, a series of deductions could only be linked if there was no gap exceeding 3 months. It means more umbrella and temporary workers have the opportunity to claim unreceived holiday pay from umbrella companies and recruitment agencies.
The ruling is binding for all the UK and Northern Ireland and PayePass CEO, Julia Kermode said it could have “major implications” across the flexible working industry:
“This landmark judgment sends a very clear message to dubious umbrella companies and recruitment agencies who do not pay their workers holiday pay. These immoral operators are now at risk of claims for staggering sums of money which is legally owed to flexible workers.
“In simple terms, this case means that the 3-month window to claim underpayments is not enforceable, so unreceived holiday pay can be claimed back from employers dating back two years irrespective of whether they received it on and off. It could mean thousands to every temp and contractor who hasn’t received their holiday pay, and it could easily cost this industry billions.
“Whilst there are still currently legal loopholes allowing these companies to withhold holiday pay, they aren’t ethical – in fact, they’re completely immoral. Common sense has prevailed and this Supreme Court ruling has closed one such loophole, shining the spotlight on holiday pay which, all too often, is withheld from workers who desperately need it.
“It’s shocking that profiteering through withholding holiday pay even goes on, and from our experience of auditing supply chains, we know that end-clients are usually totally unaware of it, even though it’s their money being redirected.
“But let’s not forget about all those who have missed out on vital income, and now have the opportunity to claim what is rightfully theirs. No doubt the legal eagles are already circling ready to support high-profile cases.”