Employment disputes do not always begin with dismissal. In 2026, many claims arise from how people are paid, how holiday entitlement is calculated, or whether an individual has been wrongly labelled as self-employed.
These issues can affect employees, workers, contractors, agency staff and businesses of every size. They can also overlap: a worker-status dispute may determine whether someone was entitled to paid annual leave, while an underpayment of holiday pay may become an unlawful deduction from wages claim.
This guide explains three important Employment Tribunal routes:
- Holiday pay and annual-leave disputes
- Unlawful deductions from wages
- Worker-status claims
It also covers evidence, ACAS Early Conciliation, tribunal time limits, remedies and the role of settlement agreements.
1. Holiday pay and annual-leave disputes
Almost all workers are entitled to 5.6 weeks’ paid annual leave each year. For someone working five days a week, this is usually 28 days, including bank holidays where the employer counts them as part of the entitlement.
The calculation can be more complicated for part-time, irregular-hours and part-year workers. The GOV.UK holiday entitlement guidance explains how entitlement should be worked out in different working arrangements.
How holiday pay disputes arise
Common disagreements include:
- Paying basic pay when regular overtime or commission should have been included
- Miscalculating holiday entitlement for part-time or irregular-hours staff
- Failing to pay accrued but untaken holiday when employment ends
- Refusing to allow a worker to take statutory leave
- Treating holiday as unpaid leave
- Incorrectly carrying holiday forward
- Using rolled-up holiday pay for a regular-hours worker
For regular-hours workers, the first four weeks of statutory leave generally need to reflect “normal remuneration”, which can include regular payments such as overtime or commission. The remaining 1.6 weeks may generally be paid at basic pay, subject to the specific circumstances and contract.
For irregular-hours and part-year workers, current rules allow holiday to accrue based on hours worked for leave years beginning on or after 1 April 2024. In many cases, the calculation is 12.07% of hours worked in each pay period. Their statutory holiday pay is generally calculated using their normal rate of pay.
Rolled-up holiday pay may be used for qualifying irregular-hours and part-year workers, provided the required uplift is clearly identified and the worker is still permitted and encouraged to take annual leave. It is not a lawful solution for every worker. Employers should check the official holiday pay guidance before changing payroll arrangements.
Evidence in a holiday claim
An employee or worker should retain:
- Their contract and holiday policy
- Payslips and bank statements
- Holiday booking records
- Timesheets, rotas and overtime records
- Commission or bonus calculations
- Emails with HR or payroll
- Records showing holiday refused or incorrectly recorded
Employers should maintain accurate records of entitlement, leave taken and holiday pay paid. From 6 April 2026, official guidance provides for more detailed annual-leave records to demonstrate compliance, including retention requirements. Payroll systems and holiday policies should be reviewed rather than relying on informal calculations.
A holiday pay underpayment will often be pursued as an unlawful deduction from wages, although other legal routes may be relevant depending on the facts.
2. Unlawful deductions from wages
The unlawful deductions regime protects “workers”, not only employees. Under section 13 of the Employment Rights Act 1996, an employer must not deduct money from wages unless the deduction is:
- Required by law, such as tax or National Insurance
- Authorised by the contract
- Agreed by the worker in writing before the deduction
A shortfall can also amount to an unlawful deduction. The employer does not need to have physically taken money from an employee’s bank account. Paying less than the amount properly due may be enough.
Examples include:
- Unpaid salary or hourly pay
- Unpaid overtime
- Missing commission or bonus payments
- Incorrect holiday pay
- Unauthorised deductions for training, equipment or expenses
- Failing to pay accrued holiday on termination
- Deductions from final pay that were not properly authorised
There is generally no minimum service requirement for an unlawful deductions claim, and a worker may be able to bring a claim while still employed.
Time limits and ACAS Early Conciliation
The usual Employment Tribunal time limit for an unlawful deduction claim is currently three months less one day from the date of the deduction or underpayment. For a series of deductions, time will generally run from the last deduction in that series.
A claim may be subject to a two-year limit on recovering earlier deductions in the Employment Tribunal. The interaction between holiday pay, a series of deductions and the back-pay limit can be technically complex.
Before issuing most tribunal claims, the claimant must notify ACAS for Early Conciliation. If notification is made within the applicable time limit, the limitation clock is paused during the process. Once ACAS issues the certificate, the claimant will generally have at least one month to present the claim, although the exact calculation depends on the dates.
The Government has also announced that most Employment Tribunal time limits are due to increase from three months to six months from 1 October 2026. The official implementation timetable and transitional provisions should be checked carefully. Employees and businesses should not assume that a future change extends a deadline that has already expired.
Possible remedies
A successful claim may result in an order requiring the employer to pay the amount withheld or underpaid. The Tribunal may also make a declaration about the worker’s rights.
The amount recoverable depends on the claim, the evidence and any statutory limits. A claimant should calculate the loss carefully and avoid relying on estimated figures where payslips, timesheets or payroll records are available.
3. Worker-status claims
Labels do not determine legal status. Calling someone a “consultant”, “freelancer” or “independent contractor” does not automatically make them self-employed.
The Tribunal will examine the reality of the relationship. The main categories are:
- Employee: usually works under a contract of employment and has the broadest employment rights
- Worker: personally performs work for another person or business that is not genuinely their client or customer
- Self-employed contractor: generally operates a business on their own account and has fewer employment protections
Relevant factors may include:
- Whether the individual must provide the work personally
- Whether there is a genuine and practical right to provide a substitute
- The degree of control over hours, tasks, location and method of work
- Who provides equipment and bears financial risk
- Whether the individual can profit from sound management
- How integrated they are into the organisation
- Whether the relationship is continuous or limited to individual assignments
- How payment, invoices, tax and insurance are handled
No single factor is decisive. The contract is important, but the way the parties actually operate may carry greater weight.
Why status matters
Workers may be entitled to core protections including:
- The National Minimum Wage
- Paid annual leave
- Protection from unlawful deductions
- Protection against discrimination
- Certain whistleblowing protections
Employees generally have additional rights, including statutory notice, redundancy rights and: where the relevant qualifying requirements are met: ordinary unfair dismissal protection.
A status claim may therefore lead to claims for unpaid holiday, wage shortfalls or other rights that were denied. A genuinely self-employed person may not qualify for these employment rights, although their contractual or commercial remedies may still need to be considered.
Businesses should review status where contractors work regular hours, are closely supervised, cannot genuinely substitute another person, or are treated like permanent staff. Misclassification can create liabilities extending beyond one individual, particularly where the same arrangements affect a group of workers.
Preparing for a dispute
Whether you are bringing or defending a claim, early preparation is important.
Create a clear chronology showing:
- When the working relationship began
- What was agreed about pay and holiday
- When the alleged underpayment or deduction occurred
- Any internal complaint or grievance
- ACAS notification and certificate dates
- Settlement discussions
Keep original documents and avoid editing messages or records. Employers should preserve payroll data, contracts, policies, holiday records and communications relevant to the dispute.
Raising the issue internally may resolve a genuine payroll error, but an internal grievance does not usually stop the Tribunal limitation period. ACAS Early Conciliation should therefore be considered promptly.
Settlement agreements and dispute resolution
A settlement agreement can be used to resolve some or all potential claims without proceeding to a full Tribunal hearing. It may address unpaid wages, holiday pay, worker status issues and other identified disputes.
For a settlement agreement to waive statutory employment claims, it must meet specific legal requirements. It must be in writing, identify the particular complaints being settled and involve advice from an independent adviser. The agreement may also cover payment, references, confidentiality, tax treatment, costs and the termination of employment.
An employee should understand exactly which claims are being waived before signing. An employer should ensure that the agreement is drafted clearly and does not overlook connected claims or unresolved pay issues.
A settlement reached through ACAS is usually recorded in a legally binding COT3 agreement. Once a COT3 has settled a dispute, a claim about the same issues will generally not be available.
How Tyndel Solicitors can help
Employment Tribunal claims often turn on detail: the correct status, the correct calculation, the correct evidence and the correct deadline. Advice from experienced employment law solicitors UK can help employees assess their options and help businesses resolve risks before they become expensive proceedings.
If your matter involves dismissal as well as pay or status issues, advice from unfair dismissal solicitors UK may also be necessary. Tyndel Solicitors advises both employees and employers on employment contracts, wage disputes, holiday pay, settlement agreements, grievances and Tribunal proceedings.
Contact Tyndel Solicitors’ Employment Law team for practical advice on your circumstances.
This article is for general information only and does not constitute legal advice. Employment law and Tribunal time limits can change, so obtain advice on the facts and dates of your particular matter.
