Holiday Pay and Holiday leave - be wary of your position

Friday 25th October 2013

Dealing with employees' holiday entitlements can be a tricky and confusing process. Especially in light of two recent decisions.

Employment law specialist James Bellamy comments on recent cases that affect this process.

Holiday Pay - should overtime be taken into consideration?

Holiday pay is calculated based on employees earnings. For those with a fixed salary it is based on 1 days pay for 1 days holiday. For those with irregular hours then it is the average of the previous 12 weeks pay.

Overtime has often not been used in calculating a days pay but the recent case of Neal v Freightliner has now changed this. In this case an employee was contractually obliged to work 35 hours per week. He often worked in excess of this but this was all voluntary overtime. His holiday pay was only ever calculated based on his 35 hours and so the employee brought a claim for the difference between this and his actual pay based on his 35 hours plus overtime.

The judge agreed and he was awarded the difference and the judge said that he was performing tasks he was contractually obliged to perform and so it should be taken into consideration for his holiday pay calculation.

Holidays – the carry over of untaken leave

There have been numerous decisions on holiday leave over the last few years and we are now in the position that holidays may be carried over into the next holiday year if the employee has been prevented from taking it due to sickness or other absences such as maternity leave etc.

Sood Enterprises Ltd v Healy has gone further with this and has ruled on how much leave may be carried over. The Working Time Directive (“WTD”)which the UK implemented under the Working TIme Regulations ("WTR") only allowed for 4 weeks holiday leave.

The government increased this leave to 5.6 weeks under the WTR and so the ruling that leave must be carried over from one leave year to the next is unclear whether it applies to 4 weeks leave or 5.6 weeks leave.

Sood has now confirmed that it only applies to the 4 weeks leave as provided for under the WTD. So employers are free to prevent employees from carrying over the additional 1.6 weeks leave. Whilst it may be advantageous to do so for some larger employers the administrative burden to actually carry out the segregation may be too great but non the less there are savings employers can now make.

Author: Administrator

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