Help
Business Reviews
Loading...
New Holiday Pay Rules, Midsummer Night’s Dream Or A Nightmare For Employers?
| Author: Charlotte Johns, Kingfisher HR | Published: 28th July 2014 10:28 |
Charlotte Johns, Sudbury and Long Melford
New Holiday Pay Rules, Midsummer Night’s Dream Or A Nightmare For Employers, Sudbury and Suffolk?
There is still time to book that last minute foreign get away or perhaps a more nostalgic tour of a little soggy patch of our green and pleasant land - But before you head off into the sunset, are you fully up to speed with recent developments around holiday pay accrual for your staff?
With recent case law developments around accrual of employees’ holiday entitlement, it seems timely to take stock and review where employers currently stand on this increasingly complex issue.
The main statutory rules on holiday rights are contained in the Working Time Regulations 1998.
5.6 weeks' entitlement each leave year
The basic right to annual leave under the WTR 1998 is 5.6 weeks' annual leave. This is equivalent to 28 days for those who work five days a week. A part-time worker is entitled to 28 days' holiday reduced pro rata, according to the number of days they work each week. A worker whose employment begins part- way through a leave year has a pro rata statutory holiday entitlement for that year.
Commission Pay
The European Court of Justice has made it clear in the recent case of Lock v British Gas, that the UK legislation which allowed employers to discount commission when calculating holiday entitlement is incorrect.
The relevant case will now be re-submitted to the UK tribunal in the next few weeks. Employers will be watching closely for further more detailed guidance from the Tribunal as the case has massive implications for UK business.
Some employers are choosing to wait until we have the detailed guidance from the UK Tribunal before they make adjustments to the way they calculate holiday for staff, who are on commission.
Other employers are taking action asap to change their holiday calculation, to include commission in order to seek to minimise potential future liabilities.
Claims where the incorrect holiday calculation is on-going can be backdated for six years or potentially longer.
If however an employer rectifies the situation for the current holiday year then this may arguably break the "chain of causation" and the employee only has 3 months from the date of the last wrongful deduction to bring a claim.
It will be a commercial judgement call for employers, whether to take a “wait and see” approach to see what further guidance is issued by the UK Tribunal or to try to pre-empt potential claims by making additional payments, taking into account commission for the current holiday year.
In the case of calculating holiday entitlement for employees who have no set hours, the UK legislation requires employers to average out the employees earnings over the previous 12 weeks prior to them taking leave. Some commentators have speculated that the UK Tribunal will take the same approach to commission. The ECJ did not issue any guidance as to the precise calculation method as this is a matter for the UK government.
Employers are advised to assess their potential exposure and decide commercially whether to await further guidance from the UK Tribunal or change the holiday calculation method immediately and make a back payment for the current holiday year.
Remember that making the back payment may minimise your exposure in terms of a backdated claim over a longer period.
As a general point you should also consider whether you have been in the habit of taking overtime into account when calculating holiday entitlement for staff as recent case law has confirmed that similar principles will apply. Please see below for further details.
Where employers decide to carry out any reconciliation then generally it is a good idea to follow a formal process to record the agreement of full and final settlement.
Overtime payments
The ECJ has held that workers must continue to receive their normal remuneration during their annual leave.
The ECJ considered this concept further in Williams and others v British Airways plc. The ECJ held that "normal remuneration" would include Remuneration that is linked intrinsically to the performance of tasks which a worker is contractually required to perform.
In Neal v Freightliner Ltd, the employment tribunal judge held that, in light of Williams, a worker's overtime payments had to be taken into account when calculating his holiday pay. Another judge however took a different view in Elms v Balfour Beatty Utilities Solutions Ltd. Here it was held that a worker's holiday pay could be calculated with reference to his basic pay and overtime payments, standby payments and bonus payments did not need to be taken into account. In the judge's view, it was not possible to interpret UK legislation to give effect to the ECJ decision in Williams.
Appeals were lodged at the EAT in all three cases. The Elms case was settled (i.e. we will have no formal outcome) . The EAT will now consider Neal and Fulton in late July 2014.
In summary, just like at the airport, when you are all packed up and ready to fly off to exotic climbs there are some conflicting messages and likely delays but please watch for further announcements!
Kingfisher 60:60 – an innovative answer to you HR support requirements - for an annual membership of £250 and a monthly payment of £60 you can have peace of mind for all your HR needs (terms and conditions apply).
Please email charlotte.johns@kingfisherhr.com for further details or call or 07580431358.
Report this article as inappropriate
Comments
You need to log in before you can do that! It's only a quick registration process to join the AMA network and completely free.
Help