Holiday pay 



Under UK law, it has long been established that all statutory holiday pay must include guaranteed overtime (that is, contractual overtime that must be offered and must be accepted). This has nothing to do with EU law and applies to the whole 5.6 weeks of the statutory holiday. 


In addition, unions have secured several landmark rulings in the European and national courts concerning holiday pay, benefiting millions of workers. Rulings by the ECJ only affect the calculation of pay for the four weeks of holiday under the Working Time Directive (WTD), not the extra 1.6 weeks of holiday that must be provided under national law. 



The leading ECJ ruling on holiday pay, Williams v British Airways [2011] EUECJ C-155/10, was won by pilots’ union BALPA. This ruling established that a worker must be paid their normal remuneration when taking their four weeks’ statutory holiday under the WTD. In other words, pay when on holiday must equate to normal pay when working. Any other conclusion would defeat the Directive’s health and safety purpose because workers would be deterred from taking holiday through fear of income loss. 



The Williams ruling also established that holiday pay must include any component of normal wages that is “linked intrinsically” to the performance of a worker’s contractual tasks. 



Another important case, Bear Scotland Limited, Hertel (UK) Limited and Amec Group Limited v Fulton, Woods, Law and others [2014] UKEATS/0047/13/B1, instigated by general union Unite, confirmed that holiday pay must include regularly worked overtime and other regular payments. 


A further ruling, this time instigated by public services union UNISON, established that voluntary overtime must also be included, as long as it is sufficiently regular (Flowers v East of England Ambulance Trust [2018] UKEAT/0235/17/JOJ). The employer has appealed against this ruling to the Court of Appeal.



Any payments that are usual and regular (as opposed to unusual or exceptional) must be treated as part of a worker’s normal remuneration (Dudley Metropolitan Borough Council v Willetts [2017] UKEAT/0334/16/JOJ).
Here are some payments that tribunals have decided must be included when calculating holiday pay under the WTD: 



• non-guaranteed overtime (that is, overtime that the employer is not obliged to offer but If offered, the employee is obliged to work);




• regularly worked voluntary overtime; 



• travel-time payments;




• payments for seniority, length of service and professional qualifications;



• call-out allowances;



• out-of-hours standby pay; 



• shift premium payments;




• weekend premium payments;




• anti-social hours payments;




• results-based commission (see below); and




• any other regular payments linked to work.




An important ruling, Lock v British Gas Trading Limited [2014] IRLR 648, instigated by UNISON, has established that where pay is made up wholly or partly of variable results-based commission (as is the case for many sales workers), holiday pay must include any commission the worker would have earned had they not been on holiday. More than 60% of Mr Lock’s wages was made up of commission. Losing this element of his pay was a serious deterrent from taking holiday and a breach of the Directive. The Lock ruling applies only to workers whose normal wages include results-based commission, not to irregular or one-off commission payments.





Where there are no normal working hours (for example, zero hours contract workers with a genuinely irregular working pattern), a week’s holiday pay must be worked out based on the worker's average weekly earnings in the 12 weeks prior to the holiday being taken. If the worker has done no work in any of the 12 weeks, the employer must go back in time to the next earlier week in which they have worked (section 224, ERA 96). 


In Brazel v The Harpur Trust [2018] UKEAT/0102/17/LA, a case brought by a visiting music teacher with the support of the Incorporated Society of Musicians, the EAT ruled that the 12-week reference period applies when calculating holiday pay for all workers with irregular hours, including those working annualised or “term-time only” contracts (such as visiting music teachers in schools) even though this can sometimes result in a “windfall” for the worker when compared to the holiday entitlement of workers with regular hours. There is no law that prevents part-time workers being treated more favourably than full-time co-workers, confirmed the EAT. 



It is unlawful to include holiday pay within the hourly rate of pay. This practice, known as “rolled-up holiday pay”, breaches the WTD, which requires workers to be paid for their holiday when they take it (Robinson-Steele v RD Retail Services Ltd [2006] IRLR 386). 





The correct way to calculate holiday pay is not to divide someone’s annual salary by 365 (a calendar year) but instead by the number of working days in the year (Leisure Leagues v Maconnachie [2002] IRLR 600, Yarrow v Edwards Chartered Accountants [2007] UKEAT 0116/07/0806).