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 supported by public services union UNISON, the Court of Appeal 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:




Another very important case, backed by 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 confirmed that voluntary overtime (that is, 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 the LRD’s annual emplotment law guide, Law at Work (www.lrdpublications.org.uk/lawatwork).



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. The ECJ decided that where a worker, after accumulating rights to paid annual leave during a period of part-time work, increases the number of hours worked, moving to full time, the annual leave entitlement in relation to the number of hours worked must be calculated separately for each period.


In a recent, important and long-running case, King v The Sash Window Workshop Ltd C-214/16, the ECJ confirmed that workers are entitled to carry over their right to pay for unpaid and untaken holiday leave to the end of their employment. In this case, a window salesperson was described as a self-employed contractor and received payment on a commission-only basis. He took less than the statutory entitlement to leave under the WTR over a number of years and the leave was always unpaid. After the company terminated his employment, he brought a claim for holiday pay to an employment tribunal. He argued that had his leave been paid, he would have taken his full statutory entitlement. 


The tribunal decided he was a “worker” under the WTR and therefore entitled to paid annual leave. It awarded him compensation for the unpaid leave he had taken and for his untaken holiday for each year he had worked for the company. After a series of appeals, the ECJ confirmed he could assert the right to payment for all his leave entitlement and carry over all his leave and therefore claim for the unpaid leave over the whole period of his employment. 


In Dudley Metropolitan Borough Council v Willetts & Ors UKEAT/0334/16/JOJ, the EAT ruled that where voluntary overtime payments are regular enough to amount to “normal remuneration”, they should be included in holiday pay. It said excluding these payments could deter workers from taking their annual leave because they would lose out financially. In this case, payments associated with the voluntary overtime worked by “quick response” trade operatives included call-out payments, mileage and standby allowances. It will be for a tribunal to decide whether voluntary overtime is regular and settled enough to be considered normal remuneration in particular cases.


In Brazel v The Harpur Trust [2018] UKEAT 0102/17/0603, a music teacher on a zero hours contract challenged the way her employer calculated her holiday pay. She worked term-time only and was entitled to 5.6 weeks annual leave, which she had to take during the school holidays. 


Her employer calculated her pay on the basis of 12.07% of the hours she worked during each of the three terms. It arrived at this figure by dividing 5.6 weeks by 46.4 weeks (52 weeks in the year minus the 5.6 weeks annual leave entitlement). The Incorporated Society of Musicians (ISM) argued, on her behalf, her holiday pay should have been calculated on the basis of average earnings over the 12-week period before the date of her holiday, using the formula set out in the ERA 1996, section 224.


The EAT found in her favour and said the correct approach for employees who do not have regular hours of work is to work out average pay in the 12-week period prior to holiday being taken.