Payment for holidays


There have been important case law developments on the calculation of holiday pay as a result of union-backed litigation in the European and national courts. These rulings only affect the four weeks of holiday under the Working Time Directive — not the extra 1.6 weeks available under UK law.



Following litigation supported by pilots’ union BALPA, it is now established under EU law that a worker must receive their normal remuneration when taking statutory holiday under the Working Time Directive. Holiday pay must be comparable to pay when working (Williams v British Airways [2011] EUECJ C-155/10). The Williams ruling established that when on holiday, workers must be paid any component of their normal wages that is “linked intrinsically” to the performance of their contractual tasks. Otherwise, the health and safety purpose of the Directive would be thwarted, because workers would be deterred from taking holiday due to the prospect of income loss.



In another key test case, this time supported by public services union UNISON, the ECJ has confirmed that for workers whose pay is made up wholly or partly of results-based commission, holiday pay must include the commission the worker would have earned if they had not been on holiday:



Mr Lock was able to enforce his right to unpaid holiday pay as a claim for unlawful deduction of wages (British Gas Trading Limited v (1) Lock and (2) BIS [2016] UKEAT/0189/15/BA). Commenting on the ruling, UNISON general secretary Dave Prentis celebrated the test case as a victory with implications “for thousands of workers in the UK and in Europe who for years have been denied a fair deal”.
An appeal by British Gas against the Lock ruling will be heard by the Court of Appeal on 11 July 2016, with a decision expected by the autumn. Thousands of cases are expected to be stayed pending the outcome.



Another very important case, this time backed by general union Unite, has established, following on from the Williams ruling, that holiday pay must include all regular overtime, both guaranteed and non-guaranteed, and all other payments that are linked to work, such as travel time payments, shift or weekend premium payments and anti-social-hours payments. These payments are all part of a worker’s “normal remuneration” that are “intrinsically linked” to the performance of tasks under the contract of employment, so they must be included (Bear Scotland Limited, Hertel (UK) Limited and Amec Group Limited v Fulton, Woods, Law and others [2014] UKEATS/0047/13/B1). 



A ruling of the Northern Ireland Court of Appeal has confirmed that voluntary overtime (i.e. overtime that the employer is not obliged to offer and which, if offered, the employee is not obliged to do) should also be included as long as it is worked regularly (Patterson v Castlereagh Borough Council [2015] NICA 47).



Despite employer fears, the Bear Scotland ruling did not result in large claims for back-payment of arrears of holiday pay. Even so, the government rushed through new regulations — the Deduction from Wages (Limitation) Regulations 2014 — limiting all claims for unpaid wages to a maximum of two years of back pay. The scope of the new regulations extends far beyond “holiday” pay to cover most claims for unpaid wages owed under the employment contract (even claims for non-payment of the national minimum wage). For more information, see LRD’s annual publication, Law at Work. 



The variable element of holiday pay should be worked out by averaging pay over the preceding 12-week period (May Gurney v Adshead & 95 others EAT/0150/06).



It is unlawful to pay holiday pay as part of the hourly rate of pay. The practice, known as rolled-up holiday pay, breaches the Working Time Directive which requires workers to be paid for their holiday at the time they take it (Robinson-Steele v RD Retail Services Ltd [2006] IRLR 386).


In Greenfield v The Care Bureau Ltd [2016] IRLR 62 the European Court of Justice (ECJ) looked at the calculation of the annual leave entitlement of a care worker whose hours of work increased from part-time to full-time.