Employment law seminar: A helping hand with holiday pay For employment law advice for businesses and HR Managers visit: http://www.ibblaw.co.uk/service/employment/employment-law-businesses We recently reported on the EAT’s decision in Bear Scotland which confirmed that aspects of overtime should be included for the purpose of calculating holiday pay (even where workers have “normal hours of work”). Following on from that you are invited to attend our seminar which will cover: 1. A brief overview of relevant case law 2. Some of the outstanding tricky issues such as the impact of other types of variable earnings (commission, bonuses) on holiday day calculations and calculation periods 3. What should employers do with employment tribunal claims for holiday pay? 4. How should holiday pay now be calculated? For employment law advice for employers on settlement agreements see: https://www.youtube.com/watch?v=t9WeOhXx6yI For employment law advice on tribunals and employee dispute resolution see: http://www.ibblaw.co.uk/service/employment/employment-tribunals-and-dispute-resolution For employment law advice on TUPE see: http://www.ibblaw.co.uk/service/employment/tupe For employment law issues associated with UK, european and international mergers, acquisitions and disposals see: http://www.ibblaw.co.uk/service/employment/mergers-acquisitions

1. A helping hand with
holiday pay
Thursday 11 December 2014
Justin Govier, Partner
Jonathan Bruck, Senior Solicitor
Erica Humphrey, Solicitor

2. Recent case law
Jonathan Bruck
Senior Solicitor

3. Working Time Directive (2003/88/EC) Article 7:
1) Member States shall take the measures necessary to ensure
that every worker is entitled to be paid annual leave of at least
four weeks in accordance with the conditions of entitlement
to, and granting of such leave laid down by national legislation
and/or practice.
2) The minimum period of paid annual leave may not be
replaced by an allowance in lieu, except where the employment
relationship is terminated.

4. Working Time Regulations 1998
Right to leave:
- Reg.13: the “Euro Right” to 4 weeks’ leave
- Reg.13A the Domestic Right to 1.6 weeks’ leave
Right to paid leave:
- Reg.16
- Right to a “week’s pay” for each week of leave

5. Employment Rights Act 1996 and a “week’s pay”
A week’s pay is defined in Employment Rights Act 1996:
1. Fixed hours of work – “the amount which is payable by the
employer under the contract of employment ...if the employee
works throughout his normal working hours”.
2. Variable hours of work – “the amount of a week’s pay is the
amount of remuneration for the number of normal hours in a
week calculated at the average hourly rate of remuneration…”
[12 week average]

6. What should be included in holiday pay?
• British Airways v Williams
• Lock v British Gas
• Bear Scotland & others v Fulton and others

7. British Airways v Williams
• Purpose of payment is to put the worker taking holiday in
a position where remuneration is comparable to periods of
work
• Remuneration for holiday must in principle be determined so
as to correspond to the normal remuneration received

8. British Airways v Williams (cont)
‘Normal remuneration’:
• Includes any aspect linked intrinsically to performance of
required tasks for which monetary amount provided which is
included in calculation of total remuneration, and/or aspect
related to personal or professional status
• Does not include components intended exclusively to cover
occasional or ancillary costs arising at time of performance of
required tasks e.g. expenses

9. Lock v British Gas
Holiday pay includes:
• Commission –‘directly linked’ to work i.e. intrinsic link
• Calculation based on average commission earned over
reference period considered to be representative

10. Bear Scotland & others v Fulton and others
Does the Directive require that overtime be taken into account
when calculating holiday pay?
Types of ‘overtime’:
• Guaranteed overtime - employer is not obliged to provide the
overtime, but the worker is obliged to work it if requested.
• Non-guaranteed overtime - employer is not obliged to provide
the overtime, but the worker is obliged to work it if requested.
• Voluntary overtime - no obligation on the employer to provide
it and worker can choose whether to work it.

11. Bear Scotland & others v Fulton and others
(cont)
• Involved non-guaranteed overtime
• Non-guaranteed overtime was directly/intrinsically linked to
tasks which a worker was required to carry out.
• Non-guaranteed overtime should be taken into account for
the purposes of calculating holiday pay.

12. Bear Scotland & others v Fulton and others
(cont)
Retrospective claims:
• Right to claim unlawful deductions (historic underpayments)
• Can back claim for series of deductions (i.e. underpayments);
• BUT any series of deductions punctuated from the next series
by a gap of more than 3 months – out of time.

13. Problem areas
Erica Humphrey
Solicitor

14. Problem areas: reference period for calculation
• 12 weeks (as with those with irregular working hours)?
• Attorney General in Lock case suggested 12 months
(commission on a monthly basis)
• NB: Representative normal period and reflect normal
working

15. Problem areas: what should be included?
• Concepts:
- “intrinsically linked to the performance of the duties”
- “pay that is normally received” “normal remuneration”
• Commission: yes
• Overtime:
- Guaranteed (employer is obliged to provide overtime) – yes
- Non-guaranteed (employer is not obliged to provide, but
employee is obliged to do) – yes
- Voluntary (no obligation on either side) - possibly

16. Problem areas: what should be included?
• Allowances: possibly
- “intended exclusively to cover occasional or ancillary costs ” - no
- bonus for performing certain tasks/or under certain conditions – yes
• Standby and emergency call-out payments: yes
• Productivity, attendance or performance bonuses: probably
• Annual bonuses: possibly

17. Problem areas: what should be included?
• Always look at contract/policy
• Analyse what the payment is being provided for
• Consider frequency and regularity of the payment
• Will the employee be disincentivised from taking their holiday
if not included?

18. Problem areas: 5.6 weeks or 4 weeks?
• Working Time Directive – 4 weeks’ holiday
• Working Time Regulations - 5.6 weeks holiday
• Practical implications for drawing a distinction

19. What to do now?
Justin Govier
Partner

20. What to do Now?
• Policy design
• May well be different for each employer
• Do nothing?

21. What to do Now?
• Bear Scotland appeal?
• Trade Union position
• Employer decision
• Is the outcome mutually acceptable for both?
• Or will someone appeal principle or claims limitation?
• Further certainty needed in points Erica raises in any event

22. Audit
• Effect of the three month ruling
• When holiday last paid
• Remuneration entitlements
• Contractual wording and practice (e.g. type of overtime)
• Regularity of voluntary overtime
• Holiday and workflow patterns (inc. shutdown)
• Effect of different reference periods

23. Other Considerations
• Culture
• Industrial relations
• Risk profile

24. Options - Claims
• Latest or live
• Attempt to settle – reference period, what in/out?
• Will employee wait for development on three month ruling
• Unionised work forces
• Quid pro quo going forward
• Individual or collective views
• Deal with employees differently?
• ET claims stay lifted
• Pay and move on
• Wait until more clear
• Communication

25. Going Forward
• Try to agree with unions
• Communication
• Do nothing?
• Keeps claims alive
• Employees likely to bring claims
• Lose potential to trade off
• Not sensible