Holiday Pay & Working Time Regulations

Employers who currently base holiday pay on basic pay are generally complying with the UK legislation (primarily the Working Time Regulations).

However, it is clear from two recent European cases that the UK legislation does not comply with the EU requirements in respect of remuneration whilst on holiday. Both cases, heard at the Court of Justice of the European Union (CJEU), called into question the UK’s implementation of the EU Working Time Directive. The first case involved an airline pilot whose ‘normal remuneration’ included an hourly ‘flying time supplement’.The second case was that of a British Gas worker whose pay was made up of roughly 40% basic pay and 60% sales commission. In both cases, the workers were only paid their basic pay whilst on holiday.

The CJEU determined that such a practice would discourage workers from exercising their statutory right to take annual leave (because of the drop in pay) and that holiday pay should be based on ‘normal remuneration’. It went on to determine that ‘normal remuneration’ should not be just the basic pay, but should include all the elements of pay that are “…intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of his total remuneration, is provided.”

Two similar employment tribunal cases (one relating to rostered but non-contractual overtime and one relating to overtime pay, standby payments and emergency call-out supplements) have been appealed to the Employment Appeal Tribunal and are due to be heard at the end of this month.

The British Gas case has now been returned to the Employment Tribunal, which will have to determine whether the UK law can be re-interpreted in line with the CJEU ruling. Recent cases involving ‘creative judicial interpretation’ suggest that this might be possible, in which case the Employment Tribunal will then go on to decide how the worker’s ‘normal remuneration’ should be calculated. In general, as previously stated, employers who use basic pay for the holiday pay calculation are currently complying with the UK legislation and we will keep you informed of the latest legal position on holiday pay.

Citation customers can get all the help they want in relation to holiday pay and any other issues, thanks to our 24/7 advice line and online tools.If you would like these benefits contact our team today