PAYROLL INSIGHT
Helen Hargreaves MSc FCIPPdip, CIPP associate director of policy and membership, provides an update on this key issue Holiday pay guidance – the quest goes on
O n a blustery afternoon in January 2016, the CIPP held a Policy Think Tank in Leeds to discuss the problems faced by employers when calculating holiday pay and leave. The meeting was attended by representatives from the department for Business, Innovation and Skills, now the department for Business, Energy and Industrial Strategy (BEIS). In the knowledge that the outcome of several high profile cases on this topic were expected over the following few months, the BEIS representatives agreed – perhaps rashly – to come back if we held a further Think Tank once the judgments in those cases had been given. Roll forward eleven months to December 2016 and the BEIS representatives were true to their word; in fact, doubly so as we held two Policy Think Tanks, one again hosted by Helen Hargreaves in Leeds, on an equally blustery December afternoon, and a second hosted by Samantha Mann in London the following week. But, in addition, a representative from the Advisory, Conciliation and Arbitration Service (ACAS) attended the London event as they were looking to develop their guidance to help employers calculate holiday pay and leave.
The position so far One of the reasons why employers are so confused about how they should be calculating holiday pay and leave – notwithstanding the particular circumstances of individual businesses – is that no-one is quite sure what the law says, and even less how it should be applied. This is understandable because there have been innumerable court cases challenging the calculation of holiday pay. Although in most instances the judgement only applies to that specific case, there can often be more widespread implications. The first important case on holiday pay was the Court of Justice of the European Union (CJEU) case of British Airways v Williams in 2012 in which it was judged that holiday pay should put a worker in a financial position which was comparable to periods of work. The CJEU said that paid annual leave should include payment for tasks that the employee was contractually required to perform, but not payments which were “intended exclusively to cover occasional or ancillary costs”. Whilst that decision was directly relevant to the airline industry, the view at the time was that it could have wider implications which could see workers arguing that certain payments such as
commission, bonuses and even non-guaranteed
overtime, should be included in holiday pay. And so it proved to be as rulings in subsequent cases have referred back to that case. Other high profile cases have included Bear Scotland v Fulton & others which has recently re-emerged in the Scottish Employment Appeal Tribunal (EAT). The original EAT ruling in November 2014 decided that people working non-guaranteed overtime could claim for additional holiday pay. The recent appeal centres on the three-month- gap test established at the original EAT, with the claimants appealing the point that any three-month gap in a series of deductions would be fatal to the right of a claimant to bring a claim for earlier arrears. As expected, Lady Wise has reserved judgment, and at the time of going to press, we are still awaiting her decision. In March 2015, an Employment Tribunal held that in Lock v British Gas Mr Lock’s holiday pay should include an element for his commission. It did so by (notionally) inserting these words into regulation 16(3) of the Working Time Regulations 1998 as follows: “(e) as if, in the case of the entitlement under regulation 13, a worker with normal working hours whose remuneration includes commission or similar payment shall be deemed to have remuneration which varies with the amount of work done for the purpose of section 221.” This additional text means that
...holiday pay should put a worker in a financial position which was comparable to periods of work
| Professional in Payroll, Pensions and Reward | March 2017 | Issue 28 16
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