Key developments in UK employment law

By Katie Russell

5 February 2015

Katie Russell discusses a number of key developments, from parental leave to bonuses.

Clawback of bonuses 

From 1 January 2015, firms authorised by the Prudential Regulation Authority will have to amend their employment contracts to ensure that variable remuneration that has vested can be clawed back from individual employees for a period of at least seven years from the date on which it is awarded. The clawback requirement will only apply in relation to variable remuneration awarded on or after 1 January 2015. Also, the ground for applying clawback has been narrowed, and will only apply if:

  1. there is reasonable evidence of employee misbehaviour or material error; or
  2. the firm or relevant business unit suffers a material failure of risk management.

Shared parental leave

A new system of shared parental leave will be available to parents of children due to be born or placed for adoption on or after 5 April 2015. This will allow mothers to share up to 50 weeks of their maternity leave (and 37 weeks of their maternity pay) with their partner. From 5 April, adoption leave will also be available to all employees regardless of their length of service. Employees with 26 weeks service will be entitled to an enhanced rate of adoption pay during the first siz weeks of their leave, mirroring the existing statutory maternity pay regime.

Collective redundancy consultation

The 'Woolworths case' (USDAW v Ethel Austin Ltd [in administration]) arose when the retailer went into administration, triggering the closure of its stores across the UK. The case changed the UK law on collective redundancy consultation. The Employment Appeal Tribunal considered whether or not there were 20 or more employees at risk of redundancy (which triggers collective consultation obligations in the UK) and ruled that it was no longer necessary to consider whether or not redundancies were at a 'single establishment'. Employees working in stores where fewer than 20 employees were redundant still had the right to be consulted collectively. the case has been referred to the Court of Justice of the European Union (CJEU) by the UK Court of Appeal. The CJEU should address two issues:

  1. the construction of the EU Collective Redundancies Directive (including the meaning of 'establishment'); and
  2. whether the Directive has direct effect in the UK.

The CJEU began hearing the case in November 2014, and it is hoped a decision will be issued in the next six months.

Holiday Pay

On 22 May 2014, the CJEU held that holiday pay must not be limited to basic salary and must include commission, where this forms part of an employee's remuneration. The case has been returned to the UK tribunal to consider the compatibility of this decision with domestic legislation. In October 2014, the Employment Appeal Tribunal held that overtime payments should be included in the calculation of holiday pay, provided that the overtime was carried out regularly and therefore amounted to the employee's 'normal' remuneration. Some UK employers are facing substantial claims as a result of this decision. Liability will be limited, however, where there is a break in the chain of incorrect payments of more than three months (for example, where an employee has not taken a holiday for that length of time).

The UK Government has launched a task force to assess the impact of the decision, and it has published draft regulations to limit claims for back pay. The key proposal from the task force is that liability for back pay will be limited to a period of two years from the date the claim is brought. This will apply to claims from 1 July 2015 onwards, and could result in an increase in claims in the short term.

Employers will nee to consider how they are going to calculate holiday pay in the future where workers regularly receive overtime or commission or similar payments. Some may still face uncertain costs regarding backdated pay and will have to accommodate the cost of paying holiday pay correctly from now on.

 For more information, please visit the website.

About the Author
Katie Russell is an associate with Shepherd and Wedderburn LLP.


  • Public sector
  • Private sector
  • Tax

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