Calculating holiday pay entitlement

In a recent case a Tribunal was asked whether employers are required to base their calculation of holiday pay on employees’ actual remuneration – including overtime, or only their basic salary.

 

The Employment Tribunal confirmed that holiday pay entitlement must be based on actual remuneration for contractually required tasks, noting that overtime and shift premia must be included in the calculation.

 

In the recent case of Neal v Freightliner Limited, an Employment Tribunal (ET) was asked to consider whether employers are required to base their calculation of holiday pay on employees’ actual remuneration (including overtime pay) or their basic salary alone. The ET confirmed that holiday pay entitlement must be based on actual remuneration for contractually required tasks, noting that overtime and shift premia must be included in the calculation.

 

The judgment follows on from the recent Supreme Court decision in British Airways plc v Williams and Others in which it was held that employees should be paid their “normal remuneration” during their four weeks statutory annual leave. The principle is that employees should be put in a financial position comparable with periods of work. In the BA case it was held that the pilot’ holiday pay should be calculated by assessing average payments made over a representative reference period, including flying pay supplements.

 

In the wake of this decision there had been some uncertainty as to the wider application of this principle, as the BA case was dealt with under the Civil Aviation (Working Time) Regulations. However, the decision in Neal v Freightliner Limited leaves little doubt that the scope of this principle has been extended beyond the airline industry.  A considerable number of claims brought to The Employment Tribunals are for holiday pay to include payments for overtime, shift premia and other allowances.

 

The Employment Tribunals have also released statistics which show that claims under the Working Time Regulations (WTR) doubled in the first quarter of 2013 and accounted for a third of all claims submitted.

 

If you would like more information on this topic, please call Margaret Merrifield on 01524 388719.