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Move set to curb holiday pay claim costs

The government has introduced new measures to reduce potential costs to employers and to clarify workers’ rights following a ruling on holiday pay.

In November 2014, an employment appeal tribunal decided that holiday pay should reflect non-guaranteed overtime – overtime that employers are not obliged to offer but a worker must work if it is offered.

The government announced on 18 December that it was taking action to protect UK employers from the potentially damaging impact of large backdated claims.

Changes made to regulations under the Employment Rights Act 1996 will mean that claims to employment tribunals on the issue cannot go back further than two years.

Workers will be able to make claims under the existing arrangements for the next six months, which will act as a transition period before the new rules come into force. The changes will apply to claims made on or after 1 July 2015.

A taskforce set up by the government after the employment appeal tribunal issued the ruling is continuing its work to assess employers’ financial exposure and how to limit the impact on businesses.