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The holiday pay saga continues with Agnew and others.

Written by Brabners LLP

Holiday pay remains a hot topic. In July, the Supreme Court handed down its judgment in the case of Harpur Trust v Brazel which confirmed that the accrual of 12.07% of pay to compensate for holidays results in an underpayment for part-year employees. Last week, on 12 January 2023, the Department for Business, Energy & Industrial Strategy (BEIS) launched a consultation on a proposal to overturn the effects of the Supreme Court’s decision in Harpur Trust v Brazel.

Yet another judgment affecting holiday pay is expected to be handed down imminently. The Supreme Court heard the case of Chief Constable of the Police Service of Northern Ireland and another v Agnew and others (“Agnew”) in mid-December 2022. Whilst the case will be decided in Northern Ireland, it could significantly impact employers all across the UK. The Agnew case concerns whether claims of unlawful deductions from wages can be brought where there are gaps of three months or more between a series of underpayments. The claims in Agnew relate to underpayments of holiday pay as a result of it being calculated using basic salary only, rather than “normal” pay which includes overtime and other allowances, such as shift allowances. As per section 13 of the Employment Rights Act 1996, the definition of an unlawful deduction is where the total wages paid to the employee is less than the total amount of wages properly payable to the employee and this deficit is treated as the deduction.

If this occurs, a claim for unlawful deductions from wages can be brought by the worker, allowing them to claim for those unpaid or underpaid wages or holiday pay in the employment tribunal, subject to a two-year backstop. This means that generally workers cannot be compensated for any deductions earlier than two years before the date of the claim. As is the norm with tribunal proceedings, the claim must be brought within three months from the date of payment of the wages from which the deduction was made. Where a complaint is brought in respect of a series of deductions or underpayments, the time limit begins to run from the last deduction or payment in the series. The Employment Appeal Tribunal’s decision in the case of Bear Scotland Ltd v Fulton and another (“Bear Scotland”) is the leading case on this point, and it considered what is meant by a series of deductions. The Tribunal in Bear Scotland concluded that a gap of more than three months between two deductions or non-payments would break the series.

However, the Court in Agnew is expected to disagree with the approach taken in Bear Scotland. It is expected to rule that provided there is a link between the deductions, they can form a series even if they are more than three months apart, up to the two-year limit.

It should be noted that this two-year backstop can be extended in certain cases, for example claims where the individual’s employment status is involved, such as where the individual has been misclassified as being self-employed and has therefore never been paid holiday pay at all. This was the case in Smith v Pimlico Plumbers, where the claimant had not received any holiday pay at all during his engagement as he was incorrectly deemed to be self-employed rather than a worker. In Mr Smith’s case, the two-year backstop did not apply, meaning that he could recover his unpaid holiday pay for each year that he worked.

If the Court’s decision in Agnew goes the way that commentators expect, then employers should be prepared for the potential for workers to bring holiday pay claims stretching back two years, irrespective of whether there has been a break of more than three months between underpayments of holiday pay. This could potentially increase the liability on employers when combined with the decision in Harpur Trust (subject to the outcome of the Government’s consultation and any new legislation which is enacted).


This bulletin is for general guidance purposes only and should not be used for any other purpose.

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