Use it or lose it!
A company contacted us with an embarrassing problem. A long-serving employee had resigned, and in her leaving letter pointed out that this lady had not been paid her 28 days holiday a year pro rata. It turns out that when the law changed in 2009, the company hadn’t updated their systems. So they had been underpaying their staff since then.
Now normally the ruling on holiday pay is that if you don’t use it in the given year, then it cannot be paid out and you lose it. So the company could have stood on their legal principles and refused to pay for anything in the past. They could just have applied the change with immediate effect going forward.
But being “right” as we all learn with experience, being right is not always the best thing for a relationship.
Before making any final decision on what to do, we worked out how much they owed each person. It turned out that it actually wasn’t too much, as they had paid above what they thought they had to, and most people worked pro rata hours.
So for all current employees (and the one that had just left), it was an average of 3 extra days holiday that they had to pay out (they had been envisaging 8 extra days per person per year).
The next step in the saga is now the people who had left the company over 3 months ago. They had heard on the grapevine about not being paid their holiday entitlement and had come asking for it to be paid. This is when we advised them that now was a good time to start standing on those legal principles.
If you have an ongoing relationship, you obviously want to make it work as well as it can. But the staff who have left, some over 2 years ago, there is no ongoing relationship. And as tribunal claims have to be submitted within 3 months of the event occurring, they would be unable to start a tribunal for unpaid monies. There is a risk that they will go to small claims court, but most of them wouldn’t bother.
Our new client has seen the error of their ways and we are now working closely with them to make sure that something like this never happens to them again!