Further Significant Holiday Pay Developments

The Employment Appeal Tribunal has now confirmed that voluntary overtime, standby allowance and call out payments shall count towards holiday pay if sufficiently regular. The decision clarifies that the voluntary elements of work are (in principle) to be treated no differently for holiday pay purposes.

By way of background, Article 7 of the Working Time Directive provides that member states must ensure that workers have the right to, at least, 4 weeks’ paid annual leave. Although this Directive does not clarify how statutory holiday pay should be calculated it has been interpreted as “normal remuneration”.

This Directive is implemented into UK Law by the Working Time Regulations 1998 and this provides workers with 5.6 weeks’ annual leave which includes the aforementioned statutory annual leave of 4 weeks.

This decision by the Employment Appeal Tribunal states that holiday pay must correspond to “normal remuneration” and that if the elements of pay are sufficiently regular or recurring that these would qualify as “normal” but this will still always be a question of fact for the Tribunal to consider in each particular case.  It also means in some cases that employers may have to take a view on how they handle “border line” cases in this regard.

Although this decision may still be subject to an appeal, employers may discover (especially given the recent abolition of fees in the Employment Tribunal) that some employees and/or trade unions may take formal steps to ensure they are receiving the correct level of holiday pay. It is therefore worthwhile reviewing holiday policies now as a matter of urgency to confirm whether they are compliant given this latest significant decision.

For more information please contact Nick Smith, Partner and Head of Employment on 0191 212 7739 or email nsmith@mincoffs.co.uk.