CCPS Holiday pay and sleepovers December 2014

Holiday pay Donald Mackinnon, Director of Legal Services

A better way to manage your employment, human resources and health & safety risks. Plan of action 1.Components of annual leave 2.General principles regarding traditional calculation of holiday pay 3.Summary of recent cases on holiday pay 4.Up to date position regarding payment of holiday pay going forward 5.Tackling potential historic liability 6.Other issues

A better way to manage your employment, human resources and health & safety risks. Components of annual leave Directive 4 weeks UK law 5.6 weeks Contract ???

A better way to manage your employment, human resources and health & safety risks. General principles regarding traditional calculation of holiday pay Normal working hours No normal working hours Amount payable under contract of employment Average pay over previous 12 weeks

A better way to manage your employment, human resources and health & safety risks. Holiday pay case law British Airways v Williams Pilots’ supplementary payments? Lock v British Gas Commission? Wood and others v Hertel (UK) Ltd and Another; Fulton & Another v Bear Scotland Regular overtime?

A better way to manage your employment, human resources and health & safety risks. Up to date position regarding payment of holiday pay going forward Question: What types of employee are likely to be affected? Answer: Those who earn additional sums that are “intrinsically linked” to their job, including those who: Earn regular commission Work regular paid overtime Receive regular allowances Whose actual hours of work are more than those stated in their contract of employment

A better way to manage your employment, human resources and health & safety risks. Question: To what holidays do the new principles apply? Answer: Only to the 4 weeks under the Working Time Directive

A better way to manage your employment, human resources and health & safety risks. Grey areas… How regular/frequent do the payments have to be? If payments fluctuate, over what period should they be averaged?

A better way to manage your employment, human resources and health & safety risks. What should employers do now? Carry out an assessment to see if their employees are affected If answer is “yes” consider changing holiday pay practices going forward (from now, 1 January or start of next holiday year?)

A better way to manage your employment, human resources and health & safety risks. Tackling potential historic liability Key findings from Wood and others v Hertel (UK) Ltd and Another; Fulton & Another v Bear Scotland: Claims must be raised within 3 months of underpayment If gap of 3 months or more between 2 underpayments “chain is broken” and claim in respect of earlier underpayment is time-barred First 4 weeks leave in each leave year are deemed to be WTD holidays

A better way to manage your employment, human resources and health & safety risks. Are the cases likely to be appealed? Finding in relation to position going forward Unlikely to change Finding in relation to historic liability More likely to be overturned

A better way to manage your employment, human resources and health & safety risks. Other issues Approach to communication with trade unions/employees Do Local Authorities have any responsibility for your liability? What is position in respect of employees who TUPE’d into your organisation

Questions and discussion

Sleepovers Gerry O’Hare, Senior Legal Manager

A better way to manage your employment, human resources and health & safety risks. Plan of action 1.Summary of relevant principles in relation to NMW 2.Determining compliance with NMW 3.Case law on treatment of sleepovers for NWM purposes 4.Ensuring compliance going forward 5.Tackling potential historic liability

A better way to manage your employment, human resources and health & safety risks. Summary of relevant principles in relation to NMW Specified minimum hourly rate to which most workers are entitled Different rates for different categories of worker All employers obliged to pay NMW irrespective of size

A better way to manage your employment, human resources and health & safety risks. Determining compliance with NMW Whether worker has received NMW will depend on their average hourly rate Total remuneration earned in relevant pay reference period Total number of hours worked in relevant pay reference period Steps 1 & 2 Steps 3 & 4

A better way to manage your employment, human resources and health & safety risks. Step 1 – identify pay reference period Pay reference period – one month or shorter if employee is paid more frequently

A better way to manage your employment, human resources and health & safety risks. Step 2 – calculate remuneration Total remuneration – gross pay before deductions for income tax and NI less payments and deductions that reduce the NMW. Includes: Basic salary Bonus, commission & other incentive payments Piecework payments Accommodation allowance Doesn’t include, e.g.: Expenses Loan by employer Redundancy payment Tips & gratuities paid through payroll

A better way to manage your employment, human resources and health & safety risks. Step 3 – calculate hours worked Number of hours worked is calculated differently depending on type of work done by worker Time work Output work Un- measured work Salaried hours work

A better way to manage your employment, human resources and health & safety risks. Step 4 – understand what is “working time” Consists of time that the worker is: Actually working Available at or near a place of work for the purposes of doing time work and required to be available for such work Travelling on business during normal working hours Attending training during normal working hours, either at work or elsewhere

A better way to manage your employment, human resources and health & safety risks. “Available at or near a place of work…” ….for the purpose of doing time work and required to be available for such work, subject to certain exceptions including the following: “In relation to a worker who sleeps by arrangement at or near a place of work and is provided with suitable facilities for sleeping, time during the hours they are permitted to use those facilities for the purposes of sleeping shall only be treated as being time work when the worker is awake for the purpose of working”

A better way to manage your employment, human resources and health & safety risks. How are sleepovers treated for NMW purposes? Are sleepovers time spent “actually working” or time spent “available at or near a place of work for the purpose of doing time work and required to be available for such work”?

A better way to manage your employment, human resources and health & safety risks. Sleepover case law Whittlestone v BJP Home Support Ltd Esparon t/a Middle West Residential Care Home v Slavikovska South Manchester Abbeyfield Society Ltd v Hopkins & Another City of Edinburgh v Lauder & Others

A better way to manage your employment, human resources and health & safety risks. Potential consequences of failure to comply with NMW NMW is enforced by HMRC Civil enforcement – notice of underpayment Criminal enforcement Name and shame Enforcement by worker by way of unlawful deduction of wages claim or breach of contract claim Could a finding of this nature jeopardise winning future public sector contracts?

A better way to manage your employment, human resources and health & safety risks. Ensuring compliance going forward First, ask yourself whether sleepovers are absolutely necessary? Could care workers be on-call from their homes as opposed to at place of work? Could you have waking night shift workers located centrally who respond to emergencies at different locations (perhaps sharing the cost with other service providers)? Any changes to this effect will no doubt involve re- negotiation with client

A better way to manage your employment, human resources and health & safety risks. If sleepovers are absolutely necessary, consider… Adjusting rates of pay to ensure compliance with NMW (perhaps accompanied by cost saving measures like a pay freeze) Ensuring mix of “normal shifts” and sleepovers results in average rate of pay exceeding NMW Decreasing length of sleepovers and increasing length of normal shifts to increase average hourly rate of pay Complete re-negotiation of terms and conditions Seeking to re-negotiate payment terms with client

A better way to manage your employment, human resources and health & safety risks. Tackling potential historic liability Pay out in respect of underpayments Sit tight and see whether any action is taken against you

Questions and discussion