Payroll insight
commission should now be included when calculating holiday pay. However, this case continues to rumble on and we are still waiting to hear whether the Supreme Court will hear an appeal from British Gas against a subsequent Court of Appeal ruling. Voluntary overtime did not escape consideration either and in June 2015 the Northern Ireland Court of Appeal heard the case between Patterson v Castlereagh Borough Council in which the employer’s legal representatives conceded that there was ‘nothing in principle’ to prevent purely voluntary overtime from counting towards holiday pay. Although the case is not binding on tribunals and courts in England, Wales and Scotland, it is of interest to all UK employers. And so it was that in April 2016 the Midlands West Employment Tribunal heard the case of White & Others v Dudley Metropolitan Borough Council, ruling that when calculating the amount of holiday pay an employer has to include payments for voluntary overtime, voluntary standby and voluntary call out payments, providing that work has been undertaken with sufficient regularity to have become part of the worker’s normal pay. The case, now renamed as Brettle & Others v Dudley Metropolitan Council, has been appealed and we are waiting for a date when the EAT will hear it. The cases outlined above are not the only ones involving holiday pay, but they serve simply to highlight the complexities faced by employers, keen to get things right, but just not sure of what ‘right’ means. A point perhaps emphasised by the CJEU which, when asked how holiday pay should be calculated, responded that the calculation was a matter for national courts to decide, on the basis of the rules and criteria set out in the CJEU’s case law on paid leave. Well, that’s clear then. Member issues With so many cases still ongoing it’s no surprise to hear that some employers unclear about what they should be doing have taken a ‘do nothing’ approach, especially when existing Government guidance is vague. So it was heartening to hear the BEIS representative state that, although we are unlikely to see regulatory change in the near future as a result of Brexit, this does not mean that the
guidance cannot be improved now. And with that encouraging statement ringing in our ears, discussions began. Though most delegates accepted the broad principles that guaranteed and non-guaranteed overtime should be used when calculating holiday pay, as should commission, there was genuine confusion about what exactly this means in practice. ...understandable why many have not yet made any attempt to include Payroll, as we all know, is dependent on detail – which is currently missing from official guidance. This became apparent from these questions: ● Should commission be included if it is paid regardless of whether someone is on annual leave or not? ● What is the difference between average pay and average normal pay? ● What is the definition of regular or regularly worked? ● When does voluntary overtime become non-guaranteed overtime? ● Should this principle include part-time workers who work overtime but fewer hours than a full-time equivalent? ● How would normal pay be calculated for those workers on zero hours contracts – there is no ‘normal’? ● Would holiday pay calculations for leavers still need to include overtime and commission? ● How does the twelve-week pay reference period fit into a monthly pay cycle? ● To increase fairness, would employers be allowed to use an annual pay reference period when including commission payments? The questions and issues raised at both events were very similar, with one overriding theme very quickly emerging: the need for more detailed guidance. What should the guidance include? Both groups agreed that the starting point must be clearer definitions. What exactly is guaranteed, non-guaranteed and voluntary overtime and, equally overtime and commission...
importantly, what is not. What is a bonus and what is commission? What does
regular mean? And so it goes on. The next requirement for good
and useful guidance is that it includes scenarios and worked examples covering both entitlement and actual calculations. Though delegates accepted that it would not be practical for the guidance to include examples covering every possible scenario, a broader range of definitions and examples would give employers more scope to be able to apply the principles to their particular circumstances. The response was very encouraging, with both the BEIS and ACAS representatives agreeing that it should be possible to extend the level of detail in the guidance. Delegates were especially pleased when the offer was made to include volunteer attendees in the review of draft guidance before publication when possible. Promotion, consistency and compliance Perhaps the most difficult discussion centred around the consistency of application amongst employers. And whilst the Think Tanks had not been arranged to consider this thorny issue it was perhaps inevitable that it would be raised. With widespread confusion amongst employers about how holiday pay should be calculated, it is understandable why many have not yet made any attempt to include overtime and commission in their holiday pay calculations; especially as inclusion will undoubtedly have a significant financial impact on businesses. However, there was concern amongst been provided, there will still be those businesses that choose not to comply, thus giving them an unfair commercial advantage. Various solutions were discussed and discarded with an agreement to focus, for now, on producing that robust guidance which is so desperately needed first. That’s a topic for another day – and perhaps another CIPP Think Tank. n Next steps ACAS now begin the difficult task of drafting the new guidance. Keep an eye on the news section of the CIPP website for progress. several delegates that once clearer and less ambiguous guidance has
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Issue 28 | March 2017
| Professional in Payroll, Pensions and Reward |
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