COMPLIANCE
in the NI jurisdiction. If it had been, the arrears would have amounted to around £300,000. The decision Significantly, the Supreme Court disagreed with a significant aspect of the decision of the EAT in Bear Scotland, concluding that for the purposes of a claim for unlawful deductions, the three-month gap between holiday pay underpayments wasn’t enough to break the entitlement to previous underpayments. The Supreme Court went on to determine that the PSNI had made a series of unlawful deductions, each being linked to its predecessor by a common error – holiday pay had been calculated by reference to ‘basic pay’ rather than ‘normal pay’. The Supreme Court also determined that due to the absence of a ‘backstop’ in NI, the claimants would be eligible to reclaim up to 25 years’ worth of miscalculated holiday pay (back to November 1998), amounting to a bill of more than £40 million. Making a claim: NI v rest of UK Although there’s now a 25-year claims limit in NI, a liability limitation of two years
currently continues to exist in England, Scotland and Wales. Historical holiday pay claims can be brought across the UK where there are gaps of three months or more between periods of underpayment. "Agents should speak to their clients about issues affecting them as early as possible" Employment tax implications for clients and agents to discuss We’ll see many cases come before the tribunals in the future and indeed, many have been waiting in the wings for the PSNI decision to be released. If you believe that your client may be at risk of having made underpayments of holiday pay, first and foremost, that client should seek employment law advice from a suitably qualified practitioner. The next step should be to consider the knock-on effect of potential employment tax implications which could accompany that underpayment and therefore must be
unpicked. There could be impacts on: l employer compliance reviews l payroll returns through real time information l pay as you earn and National Insurance contribution underpayments l pensions adjustments (where the pay is pensionable) l employee human resource self-service portals l pensions and rewards platforms. Consider also unionised businesses and Transfer of Undertakings (Protection of Employment) (TUPE) transfers where mergers have taken place, especially involving NI businesses, to ensure the due diligence takes this case decision into account. Additionally, employees in receipt of an arrears award who are on tax credits may need to discuss this matter with HM Revenue and Customs. Other considerations It may be necessary for agents who run payroll bureaux to review letters of engagement on the basis of this case. Agents should speak to their clients about issues affecting them as early as possible. n
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| Professional in Payroll, Pensions and Reward |
Issue 96 | December 2023 - January 2024
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