Ciara Fulton

Thousands of PSNI officers are set to receive up to £30 million in backdated holiday pay after judges ruled that the force must rectify underpayments dating back to 1998.

The main issue in the case was how far back the claims could go, which turned on whether a gap of three months between underpayments of holiday pay, or the payment of a correct amount of holiday pay, broke the chain of a series of deductions.

The Supreme Court held that it did not if the series was factually linked, here by reference to the incorrect basis for the calculation.

Ciara Fulton, partner and head of Lewis Silkin’s Belfast office, said the decision “puts holiday pay back in the spotlight and potentially increases the financial exposure for employers who have not calculated holiday pay correctly”.

It is currently estimated that 138,000 holiday pay cases were put on hold in Northern Ireland pending the court’s decision.

Ms Fulton said: “The ruling is particularly significant for employers who did not increase holiday pay in response to previous European Court of Justice decisions. Those who are still calculating holiday pay based on basic pay only may now face greater liability — especially in Northern Ireland where there’s no two-year limit to claims in place.

“Employers in Great Britain are in a better position, because there is a two-year limit on how far back holiday pay claims can go.”

She continued: “The ruling also has some wider implications. First, it means that the ‘three-month gap’ cannot be used by employers in claims about other kinds of underpayment (not just holiday pay) so workers can make claims for historic deductions no matter how far apart as long as there’s some common fault.

“Second, the Supreme Court has also ruled that holiday is not necessarily disaggregated into Working Time Directive leave, UK statutory leave and contractual leave. The default position is that each day’s leave is a composite of all three. This adds complexity because different rules about carry forward and pay apply to the different types of leave.”

The UK government has consulted on simplifying holiday pay laws in Great Britain following Brexit.

Ms Fulton said: “This latest judgment makes legislative clarity and reform more urgent in Great Britain, but also demonstrates the urgent need for consideration of these issues by Stormont, as the proposed changes do not apply in Northern Ireland.”