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Minimum 4 weeks’ holiday pay calculation, non-guaranteed overtime must be included

In Bear Scotland Ltd v Fulton and another; Hertel (UK) Ltd v Wood and others; Amec Group Ltd v Law and others the EAT had to decide whether regular non-guaranteed overtime, together with the taxable element of radius allowances and travelling-time payments, should be included in statutory holiday pay calculations.

In Bear Scotland Ltd v Fulton and another; Hertel (UK) Ltd v Wood and others; Amec Group Ltd v Law and others the EAT had to decide whether regular non-guaranteed overtime, together with the taxable element of radius allowances and travelling-time payments, should be included in statutory holiday pay calculations.

The central issue was to determine what Article 7 of the EU Working Time Directive (WTD) required by way of paid annual leave and whether Regulation 16 of the Working Time Regulations 1998 (WTR) can be interpreted to give effect to Article 7’s requirements.  ECJ case law has held that any aspect of pay that is intrinsically linked to the performance of the tasks the worker is required to carry out must be taken into account in the calculation of holiday pay. Therefore Article 7 of the WTD requires that pay that is “normally received” must be included in holiday pay. For a payment to be normal, it has to be made for a sufficient period of time and can apply to overtime payments.

These cases related to non-guaranteed overtime, i.e. overtime that the employer is not obliged to provide but which, if the employer offers it, the employee is contractually obliged to perform. The EAT held that the WTD required that such non-guaranteed overtime must be included in the calculation of holiday pay and the WTR should and could be interpreted accordingly, because as the overtime was required so frequently, the overtime payments constituted “normal pay” and therefore were intrinsically linked to tasks that the workers are required to carry out.

The EAT also ruled that the taxable element of radius allowances (paid to any employee who travelled daily between his or her home and a site over eight miles away if a full day was worked) and travelling-time payments (for time spent travelling at the rate of one hour of basic rate pay for the first 30 miles travelled, and half an hour for each subsequent 20 miles, in each case) do fall within the definition of “normal remuneration” when calculating holiday pay. In the circumstances in which these radius allowances and travelling-time payments were paid, these were not ‘costs’ because a person has to travel to his or her place of work, and therefore it is time spent which is directly linked to the work carried out.

As far as backdated holiday pay claims were concerned, the EAT reiterated that a failure to pay holiday pay under the WTR can be brought as an unlawful deduction from wages claim under S.13 ERA 1996, but the claim must be presented within three months of the deduction, or where there is a 'series of deductions', the claim must be brought within three months of the last deduction. Within this context, the EAT held that if a claim involves a series of underpayments over a considerable period of time, any claims for the earlier underpayments will fail if there has been a break of more than three months between such underpayments.

Note: The EAT gave permission to appeal to the Court of Appeal. In addition, the judgment only applies to 4 weeks of a worker's annual leave, required under the EU Working Time Directive. It does not apply to the further 1.6 weeks annual leave required under the WTR, or to any further contractually enhanced annual leave allowances. 

Content Note

The aim is to provide summary information and comment on the subject areas covered. In particular, where employment tribunal and appellate court cases are reported, the information does not set out full details of all the facts, the legal arguments presented by the parties and the judgments made in every aspect of the case. Click on the links provided to access full details. If no link is provided contact us for further information. Employment law is subject to constant change either by statute or by interpretation by the courts. While every care has been taken in compiling this information, SM&B cannot be held responsible for any errors or omissions. Specialist legal advice must be taken on any legal issues that may arise before embarking upon any formal course of action.

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