HOLIDAY PAY by Nicola O’Dwyer Bond Payroll & HR Conference 3 December 2015

− Legislation − Statutory entitlement − Update on Holiday Pay, Case Development and Overtime − Sickness absence and holiday pay − Entitlement to holiday pay on termination of employment − Rolled up holiday pay − Claims and Remedies CONTENT

LEGISLATION - Working Time Directive Working Time Regulations 1998 especially 13, 13A, 14 and 16 - Employment Rights Act 1996 ss.221 to 224

HOLIDAY ENTITLEMENT weeks or 28 days paid holiday - Holiday pro rata for part-time employees - Contractual holiday entitlement

HOLIDAY ENTITLEMENT How much should employees be paid? - “Workers are to be paid during statutory annual leave at a rate of a weeks pay for each weeks holiday” – Working Time Directive. - Normal hours and without any additional pay, will be a days pay. - Irregular hours: an average of all the remuneration for the previous 12 working weeks.

CASE UPDATE Williams and other v British Airways Pilots bought a claim for supplements to be included in their holiday pay. The Pilots were successful in their claim. It was found that holiday pay should include remuneration which is: - “Intrinsically linked to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of this total remuneration provided”.

CASE UPDATE Lock v British Gas Trading Limited [2012] - Mr Lock claimed that commission should be included in holiday pay The ECJ found that commission should be included in holiday pay Bear Scotland v Fulton [2015] - EAT held that overtime should be included for calculations of holiday pay.

CASE UPDATE - Holiday pay should include: commission payments incentive bonuses overtime (not voluntary overtime) payments that relate to “personal and professional status” of workers. productivity/performance bonus shift allowances and premiums standby payments and payments for emergency call out duties travel and other allowances treated as taxable remuneration

CASE UPDATE - Do not include: benefits in kind bonuses not linked to workers performance expenses (including travel expenses) for costs incurred one-off bonuses and occasional payments

CLAIMING BACK HOLIDAY PAY - Deduction from Wages (Limitation) Regulations 2014 implemented on 8 th January Unpaid holiday claims will be limited to two years from date of claim. - Cannot be claimed as a deduction where there were more than three months between the deductions.

CLAIMING BACK HOLIDAY PAY Pereda v Madrid Movilidad SA - Annual leave can be rearranged if an employee falls sick during the period. - Clarify in policies to obtain a medical certificate. - “ensure that every worker is entitled to paid leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice”. Working Time Directive. - First four weeks of statutory annual leave cannot be replaced by payment.

HOLIDAY AND LONG-TERM SICKNESS - Stringer v HMRC - Employee on long-term sickness - Holiday must be carried over - You cannot be paid for statutory annual holiday unless your employment has been terminated - KHS AG v Schutte - Restrictions on amount of holiday carried forward

FAMILY FRIENDLY RIGHTS AND HOLIDAY - Holiday continues to accrue whilst on maternity or adoption leave. - Holiday can be carried over to the next year. - Employees to add holiday on to the beginning or end of their leave.

DISMISSAL/RESIGNATION - Accrued but untaken holiday pay to be paid to employee. - Holiday taken in excess to be deducted from final salary payment. - Calculating holiday pay: (A x B) – C A – period of annual leave entitlement B – proportion of the workers leave year which expired before the leave date C – period of leave taken by the worker between the beginning and end of employment

DISMISSAL/RESIGNATION Example: - Holiday year 1 st January to 31 st December - Employee leaves on 15 th August - Employee took 11 days holiday (5.6 x 227/365) – 2.2 = Employee entitled to times a weeks pay

DISMISSAL/RESIGNATION - Employer can request employee takes holiday during notice period - Provide correct notice - Payment in lieu of notice and holiday pay

ROLLED UP HOLIDAY PAY - Workers on casual contracts paid at the end of the month - Deters workers taking annual leave - Case law dictates rolled up holiday pay is illegal - Risk if employers use rolled up holiday pay of a claim

STATUTORY HOLIDAY: CLAIMS AND REMEDIES - An employee can bring a claim within the employment tribunal if their employer does not: Allow them to take their statutory leave; Pay them in respect of unused leave on termination; and Pay them a week’s pay for each week of leave.

CONCLUSION - What is your employees entitlement to Holiday pay? - You cannot pay in lieu for holiday unless the employment has been terminated. - Holiday can be carried over if employees are unable to take their holiday due to sickness, maternity, adoption leave.

Any questions?

Downs Solicitors LLP, 156 High Street, Dorking, Surrey, RH4 1BQ and The Tanners, 75 Meadrow, Godalming, Surrey, GU7 3HU T: F: E: