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Holiday pay – a round-up of the current position

Following Mr Branson’s announcement last week that he was giving his head office staff “unlimited” holiday, we thought it was high time to take stock of the current legal position on holiday pay. This is an aide memoire and brief summary of where we left off a few months ago as we revisit the snail-paced progression of the various holiday cases through the courts.

Calculating holiday pay

At the end of July this year the Employment Appeal Tribunal (EAT) pondered the numerous and complicated arguments submitted from a range of parties in the joint appeals of Fulton v Bear Scotland Limited and Wood and Others v Hertel & AMEC. Counsel were recalled to deliver submissions in early September 2014 and a decision is expected sometime in the autumn. The central question in these cases is whether overtime should be included in the calculation of holiday pay, but a similar question relating to allowances is also under consideration.

 

 

Some of the key questions which it is hoped will be addressed in the decision are whether tribunals can re-write the legislation in accordance with the requirements under European Law or whether this should be the role of Parliament.

Also the important issue of whether any amendments to UK law would apply to the 5.6 weeks leave granted under the UK Working Time Regulations or just the 4 weeks under the EU Working Time Directive. Perhaps most crucially, these cases involve questions of historic liability and back pay, and it is hoped the EAT will provide a definitive view on how far back such claims can go and when there would be an effective break in a series of deductions that would limit the extent of back pay claims. We will of course update you once the EAT decision is handed down.

Another key case in the holiday saga is Lock v British Gas which was due to be heard by the Leicester Employment Tribunal on 20 and 21 October 2014. This has now been postponed and we understand is likely to be heard in February 2015.  This case has already been referred to Europe and the Court of Justice of the European Union has decreed that account should be taken of commission when calculating holiday pay. It is now for the Leicester Employment Tribunal to apply this determination in accordance with UK law and to the particular facts of this case. The outcome is likely to have significant implications for any employer who operates a commission based scheme.

For now, the majority of employers are reviewing their current arrangements and identifying any potential risks, particularly relating to back pay and attempting to quantify potential liabilities. If minor alterations to the way holiday pay is calculated can be made in order to try and limit potential exposure and liabilities, some employers are deciding to go ahead with such changes despite the lack of clarity in this area of the law at present. Some Unions are also becoming more vocal on the issue and threatening to bring protective claims for backpay, so this is a particularly live issue for any employers with unionised workforces. The overriding approach appears to be some background work on potential liability and budgeting and then adopting a wait and see approach to this potentially radical change.

Our holiday pay hub is your resource for holiday pay issues and contains all our holiday pay blogs.

Keep up to date and follow us: @dwf_employment

 

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further