Holiday pay ruling ‘entitles many UK workers to thousands in unfairly deducted wages’

Many UK workers could be entitled to thousands of pounds “unfairly” deducted from their pay after a supreme court decision, according to unions.

The judgment relates to a long-running row about holiday pay but Unison, which participated in the case, said the ruling affected all other types of payment to employees and called it a “victory for underpaid workers”.

In 2018, an employment tribunal ruled that unlawful deductions were made from the holiday pay of more than 3,700 Police Service of Northern Ireland (PSNI) officers and civilian staff over a period of 20 years. Since then the case has been making its way through the legal system.

The PSNI accepts the claimants were underpaid but disputed the period of time for which they were entitled to recover sums they should have been paid. The supreme court has unanimously dismissed the force’s appeal – meaning it faces having to hand over about £40m in holiday pay to staff.

Unison said the previous interpretation of the law meant workers had been missing out on money they were rightfully owed. Prior to the PSNI ruling, workers who consistently received incorrect pay could make a claim at an employment tribunal for only the most recent underpayment. They could include similar underpayments on previous occasions – but not if there was a gap of three or more months between them.

The new judgment means many workers will be able to challenge underpayments in their wages even if there is a big gap since the last time this happened, the union said.

It added that while the case focused on holiday pay, “the issue affects any employee and applies to claims on all forms of wages”.

For holiday pay, commission and bonuses, legislation in Great Britain (but not Northern Ireland) means individuals can only go back up to two years when it comes to claims for unlawful deduction from wages.

However, Unison said that for other payments including statutory sick pay, statutory maternity, paternity and adoption pay, and time off for union duties, the claim can go back to when the underpayment first began.

Shantha David, Unison’s head of legal, said that for years many workers had been treated unfairly but “this judgment ensures they will get all the wages they are rightfully owed”.

Jo Moseley, a member of the law firm Irwin Mitchell’s employment team, said: “Today’s ruling is of major significance and has the potential to cost UK businesses millions of pounds.”

She added that “many businesses will be concerned”, and that some would have to pay their staff “a substantial amount” to settle their cases.