To All Members
Holiday Pay Ruling
Further to our Circular 44/14 dated 6/11/14.
You will probably be aware of the Employment Tribunal Ruling (“EAT”) ruling last month on holiday pay and overtime payments. We have been working to understand the implications for officers, and to ensure that we act in their interests.
Having taken advice from our lawyers, Thompsons, who represented the Claimants in two of the three joined cases before the EAT, we set out a summary of the law and the EAT decision below.
- All workers are entitled to a minimum of 5.6 weeks’ annual leave per year. This equates to 28 days per year for workers working a 5 day week. For those working fewer days per week the entitlement is pro-rated. If an employee works 4 days a week the entitlement is 22.4 days (5.6 x 4) and so forth. A contract of employment can provide that a worker is entitled to more than the minimum leave.
- The 5.6 weeks’ annual leave is broken down into two categories; 4.0 weeks’ leave which is a minimum entitlement required by European law, and “additional” annual leave which is 1.6 week’s leave which was added by the UK government. The EAT decision is only concerned with the minimum leave entitlement and not any additional contractual entitlement. Further the EAT decision only concerns the 4 weeks ordinary leave derived from European law.
- Until relatively recently the law in the UK for a number of years has been that overtime hours are not to be included when calculating holiday pay unless overtime is contractually guaranteed (i.e. obliged on both sides, which means the employer has to give it to the worker and they have to work it).
- A number of recent European Court decisions have ruled that workers on annual leave should receive their normal remuneration and, further, that normal remuneration entitled a worker to any payment, which is ‘intrinsically linked’ to the performance of the tasks they are required to carry out under their contracts of employment. It was left to the domestic courts to determine what elements of remuneration would be deemed to be intrinsically linked to performance.
- In light of the European decisions the EAT decided that the calculation of holiday pay for the purposes of the 4 weeks ordinary leave must include guaranteed and non-guaranteed overtime pay which is regularly required to be worked, as well as other payments, such as shift allowance, on call payments and travel time and unsociable hours payments, that are 'intrinsically or directly linked' to the work the worker does and are not costs or payment of expenses such as subsistence allowance and mileage. Non-guaranteed overtime is where the employer is not required to offer it but if it does the worker is required to work
The EAT decision is not being appealed.
Therefore the law now says that what a worker should get paid in the first 4 weeks of their holiday in each year should reflect what they normally get paid, including overtime and other payments linked to the tasks they carry out. However if workers work overtime infrequently or receive other supplements infrequently such payments are unlikely to be “normal” and so should not be reflected in the holiday pay.
There will be no impact on workers who are salaried, i.e. typically senior personnel who do not receive overtime or other additional payments such as allowances, bonuses etc.
It is already settled law that workers can claim holiday pay in the Employment Tribunal (ET) as a claim for unlawful deductions of salary. An unlawful deduction from wages claim would need to be made within three months of the date on which the deduction was made (which would be three months from the date on which the holiday payment was made and the shortfall in holiday pay occurred rather than when the holiday was taken) or on which the last of a series of deductions was made. As with other ET claims, a claim cannot be pursued in the ET unless a Claimant can show that they have exhausted the Early Conciliation (“EC”) process with ACAS. The EC process will extend the 3 month time limit EC will extend the time limit and the length of the extension will depend on when EC is concluded. Importantly the EAT also ruled that if the holiday pay was paid wrongly more than 3 months ago then the claim is out of time and cannot be pursued in the ET.
The DPF has taken legal advice, and believes that the ruling means that our members are entitled to holiday pay that includes their regular overtime pay and several other regular allowances too. This will be for a maximum of four weeks of each holiday year.
While for each individual member the sum involved is likely to be relatively small, (that is, probably less than £100), the fact that the amount owed will be calculated on an individual basis means that there will be a range of payments to which members will be entitled. The administrative burden and financial cost of processing claims is likely to be high – both for the DPF, and for our force. We believe that the most cost effective way of doing this is to seek to negotiate with the MOD that all members, whether they have lodged formal claims or not, should at least receive the normal pay, including overtime etc. going forward. We will also attempt to secure agreement that the MOD agrees to pay any salary owed to members from the date of the EAT decision which was 4th November 2014. The NEC has written to the Department to open negotiations.
We will update you on this matter as it progresses.