First presented to the Kent Legal Services Annual Employment Law Conference 2014
Calculating holiday pay – What is normal remuneration in
the light of recent decisions?
If we took a holiday
Took some time to celebrate
Just one day out of life
It would be, it would be so nice
Madonna
We're all going on a summer holiday
No more working for a week or two...
Everybody has a summer holiday
Doing things they always wanted to
Cliff Richard
Or why one of the good things about being a member of the EU is that we getter longer
holidays than the average American.
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Introduction
1. Employment law moves fast. The issue of holiday pay and the calculation of the
same has seen some more important developments since I agreed to speak on this
topic. In particular there has been the Opinion of the Advocate General in Lock v
British Gas Trading Ltd delivered on 5 December 2013 and a significant amount of
publicity given to the decision dated 12 July 2013 of the Birmingham ET in Neal v
Freightliner Ltd and which is now being appealed to the EAT.
2. This talk will concentrate on the decision in British Airways plc Williams (NO2)
UKSC 43, the Opinion in Lock v British Gas Trading Ltd and the first instance
decision in Neal v Freightliner Ltd. The talk is primarily concerned with the
calculation of holiday pay and payments in lieu of holiday pay on the termination of
employment.
3. A number of employment commentators have suggested that claims for the non
payment of the right amount of holiday pay in the light of Lock and Neal are likely to
be numerous in 2014 – it is undoubtedly one of the ―hot‖ employment law topics of
2014.
Why we need holidays
4. The pre-amble to Directive 2003/88/EC (see below) makes clear that proper
provision for holidays is a health and safety issue which should not be ―subordinated
to purely economic considerations‖. All workers should have adequate rest periods
not only during the working day but also by way of holidays.
5. Whilst holidays are primarily required for the well being and general health of the
worker/employee in some industries/businesses (particularly financial) the absence
of an employee from the work place for a fixed period can also be of assistance in
preventing fraud in that it is more difficult for a dishonest employee to cover his or her
tracks when they are away from the office for say 2 weeks.
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Legislative background/context
6. Any consideration of the current state of the law in relation to holiday pay requires
one to be familiar with the relevant provisions of Directive 2003/88/EC – the Working
Time Directive, the Working Time Regulations 1998 (―WTR‖) and the Employment
Rights Act 1986. The most important provisions are annexed as a schedule to these
notes.
7. By way of summary Regulations 13 and 13A of the WTR together provide for the
minimum amount of annual leave which is 5.6 weeks per "leave year", subject to a
cap of 28 days. Regulation 13(3) defines a "leave year‖ in the absence of an
agreement (which most contracts of employment will contain).
8. The entitlement to be paid a week's pay for each week of annual leave is found in
regulation 16(1). It is the calculation of that week‘s pay that we will focus on during
this talk.
9. It is important to remember that regulation 16 applies to workers as well as
employees, worker being defined in familiar terms in regulation 2(1).
10. Except on termination holiday pay cannot be paid in lieu of the worker taking his
holiday (regulations13 (9) and 13A (6)) so there will only be claims for holiday pay on
termination or if it is alleged that the correct amount of holiday pay has not been paid.
However holiday pay falls within the meaning of wages so a claim for unpaid or
underpaid holiday pay can be brought pursuant to section 13 ERA 1986 and if the
Tribunal is satisfied that the failure to pay the proper amount of holiday pay
amounted to a ―series of deductions‖ then such claims can go back over a number of
years.
11. As is so often the case in employment law there is both EU and domestic provisions
to consider and so far as the law relating to holiday entitlement is concerned this
originates from the Working Time Directive and the CJEU‘s consideration of the
implementation of the Directive is central to any understanding of the issues involved.
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The position before Williams
12. A worker‘s right in respect of holiday is two-fold: there is a right to take holiday and
there is a right to be paid for that holiday. A worker should be paid for the holiday that
is taken because otherwise the worker might be discouraged from taking holiday and
the failure to take holiday may be detrimental to the health of the worker.
Commission
13. In Evans v The Malley Organisation Ltd (trading as First Business Support)
[2003] I.C.R. 432 the applicant was employed as a sales representative under a
written contract of employment. He was paid a basic wage and commission in
relation to contracts sold to clients, which was the larger part of his remuneration. His
holiday pay entitlement however was by reference to his basic pay only. When the
applicant resigned from his employment, his holiday pay was calculated by the
employer using the applicant's basic weekly rate of pay. The applicant complained
that his holiday pay should have been calculated by including commission. The
employment tribunal, rejecting his claim, held that the applicant had normal working
hours and that his remuneration did not vary with the amount of work done in the
period, and that, accordingly, the amount of a week's pay for the purpose of
calculating his holiday pay was the amount payable under his contract of
employment, in accordance with section 221(2) of the Employment Rights Act 19961.
An appeal by the applicant to the Employment Appeal Tribunal was allowed on the
ground that, by virtue of section 221(4), as someone who received commission which
was payment not by reference to the amount of work done but by reference to the
varying result of work done, he was entitled to have his weekly pay calculated in
accordance with the averaging provision in section 221(3).
14. The Court of Appeal allowed the employer‘s appeal finding that the distinction
between subsection (2) and subsection (3) of section 221 of the Employment Rights
Act 1996 turned on whether the employee's remuneration did or did not vary with the
amount of work done in normal working hours; that subsection (4) did not bear on the
issue of whether a contract fell within subsection (2) or (3) and did not require or
permit all contracts in which commission was a part of the remuneration to be placed
within subsection (3); that the ―amount of work done‖ in subsection (2) did not mean
that amount of work and that part of the work which achieved a contract; so that,
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although the applicant's remuneration varied, it did not vary ―with the amount of work
done‖; and that, accordingly, the employment tribunal were correct in holding that the
applicant's weekly pay fell to be determined under section 221(2).
15. The effect of the decision in Malley was that variable commission would not be taken
into account if the payment of commission did not depend on the number of hours
worked, and the remuneration was linked not with the amount of work done, but with
its success. In other words in most cases commission would not be taken into
account when calculating holiday pay.
Overtime
16. The Court of Appeal had to consider in Bamsey v Albon Engineering &
Manufacturing Plc [2004] I.C.R. 1083 whether in calculating holiday pay whether a
"week's pay" for "normal working hours", should include payment for overtime which
the employer was not required to provide under the employee's contract of
employment. Under the contract the employee was only required to work 39 hours
per week but in the 12 weeks prior to his holiday he had worked an average of 60
hours per week.
17. The Court of Appeal decided that the employee was only entitled to payment on the
basis of a 39 hour week. It was clear from s.221, s.224 and s.234 of the ERA that
where overtime was worked, only that which the contract of employment required the
employer to provide counted as "normal working hours" for the purposes of
calculating "a week's pay". Section 234 contained the meaning of the term "normal
working hours" and the circumstances when overtime was to be regarded as falling
within that definition. Mr Bamsey's case did not fall within the ambit of s.234. Thus,
his overtime hours were not part of his "normal working hours" and were not to be
included in calculating "[his] week's pay." Auld LJ said:
―...there is no basis for reading article 7 of the Directive as requiring a broad
equivalence of pay for work done, namely overtime, which the employer was
not bound to provide under the contract of employment, with payment on
annual leave for overtime work not done at all.‖
5
―...although the Directive was intended to have the effect of encouraging
workers, for the sake of their health, to take their full leave entitlement, which
they might not do if their holiday pay is significantly less than their normal
working pay, it could equally be said that it was not intended to encourage
them to enter into contractual arrangements in which they submitted
themselves to obligatory long and unhealthy working hours for 11 months of
the year by the additional carrot of a level of holiday pay to match such hours
when they were not actually working them.‖
18. Bamsey was therefore clear authority for the proposition that non-contractual
overtime should not be taken into account when calculating holiday pay.
Rolled up holiday pay
19. The case of Robinson-Steele v RD Retail Services Ltd (C-131/04) [2006] All E.R.
(EC) 749 concerned what was known as ―rolled up‖ holiday pay which was
particularly popular in relation to casual or temporary employees. With rolled up
holiday pay the worker received an increasing amount each week in his pay packet
which was described as "holiday pay".
20. The ECJ again emphasised that the entitlement of every worker to paid annual leave
was a particularly important principle of Community law from which there could be no
derogations. The holiday pay under Art.7(1) of the Directive was intended to enable
the worker actually to take leave to which he was entitled. The court concluded that
the practice of some employers of ‗rolling up‘ workers' holiday pay entitlement into
their hourly rates of pay and not remunerating them when they actually take leave is
contrary to the terms of the Working Time Directive
- which required specific
payment for the particular period during which the worker takes leave. The Directive
precluded the payment for minimum annual leave within the meaning of that
provision from being made in the form of part payments staggered over the
corresponding annual period of work and paid together with the remuneration for the
work done, rather than in the form of a payment in respect of a specific period during
which the worker actually took leave since that could lead to replacement of the
minimum period of paid annual leave by an allowance in lieu.
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21. Robinson-Steele effectively put an end to rolled up holiday pay arrangements.
Normal remuneration
22. The decision of the ECJ in Stringer and others v Revenue and Customs Comrs
[2009] I.C.R. 932 held that the right to paid annual leave was not extinguished at the
end of a leave year and/or any carry-over period where the worker had not had the
opportunity to exercise that right because he was on sick leave. If an employee was
sick they could not take holiday should retain the right to take that holiday in a
subsequent period. The decision also contained references to ―normal remuneration‖
which have been referred to in subsequent decisions of tribunals that have been
considering whether to include elements of the employee‘s remuneration beyond the
basic pay. At paragraph 58 it was said:
―the expression ―paid annual leave‖ in article 7(1) of Directive 2003/88 means
that, for the duration of annual leave within the meaning of that Directive,
remuneration must be maintained and that, in other words, workers must
receive their normal remuneration for that period of rest‖
23. When the matter went back to the House of Lords (where it was one of a number of
appeals and where the lead appeal was Ainsworth) Lord Rodger quoted the following
passage from the ECJ:
―60. According to the case law of the court, Directive 2003/88 treats
entitlement to annual leave and to a payment on that account as being two
aspects of a single right. The purpose of the requirement of payment for that
leave is to put the worker, during such leave, in a position which is, as
regards remuneration, comparable to periods of work: see Robinson-Steele ,
para 58.
―61. It follows that, with regard to a worker who has not been able, for reasons
beyond his control, to exercise his right to paid annual leave before
termination of the employment relationship, the allowance in lieu to which he
is entitled must be calculated so that the worker is put in a position
comparable to that he would have been in had he exercised that right during
his employment relationship. It follows that the worker's normal remuneration,
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which is that which must be maintained during the rest period corresponding
to the paid annual leave, is also decisive as regards the calculation of the
allowance in lieu of annual leave not taken by the end of the employment
relationship.‖
24. One could clearly see a trend in these cases and it was not surprising that the
entitlement to include elements of remuneration beyond basic pay in making the
necessary calculations would have to be reconsidered by the higher appeal courts.
The decisions in British Airways plc Williams
25. This matter started with an Employment Tribunal decision in May 2007 and was
finally concluded by a decision of the Supreme Court in October 2012 with a decision
of the CJEU (following an earlier referral by the Supreme Court) in between. In fact
the Supreme Court remitted the matter to a tribunal so there was even another stage.
26. The case actually concerned the Civil Aviation (Working Time) Regulations 2004 and
the entitlement of pilots to various sums when calculating holiday pay. Whilst the
case strictly speaking therefore concerns different regulations to those in relation to
the vast majority of cases the wording of the regulations is very similar and the
decision is not confined to pilots.
27. Pilots pay in addition to salary included (a) a fixed annual sum, plus two
supplementary payments varying according to the time spent flying, consisting of (b)
the flying pay supplement (―FPS‖) paid at £10 per flying hour and (c) the time away
from base allowance (―TAFB‖) paid at £2.73 per hour. British Airways contended that
TAFB was ―introduced to replace meal allowances, sundries and the Gatwick duty
allowance‖ and to be ―increased in accordance with the UK Retail Prices Index for
Catering–Restaurant Meals‖. The Revenue and Customs' attitude was that the TAFB
was over-generous and that 18% of it was taxable, in effect as pure remuneration.
The case concerned which if any of these elements should be included when
calculating holiday pay.
28. The Employment Tribunal and the EAT found in favour of the pilots allowing these
additional components to be taken into account when calculating holiday pay. In
8
making its decision, the EAT referred to the ECJ decision in Robinson-Steele v.
R.D. Retail Services Ltd [2006] ICR 932 which emphasised the need to ensure that
holiday pay puts workers, during leave, in a position as regards remuneration that is
comparable to the way they are remunerated when at work.
29. The Court of Appeal allowed British Airway‘s appeal. Its decision referred to the
particular differences found in the Aviation Regulations and found that the holiday
pay should be determined by the pilots‘ service agreements. The calculation of
―normal pay‖ was a matter for each member state to determine in accordance with its
own legislation and practice.
30. When the matter first came before the Supreme Court they referred 5 questions to
the CJEU regarding the nature and assessment of the concept of ―paid annual
leave‖.
31. In September 2011 he CJEU made the following findings on the general principles
involved:
The Directive ―must be interpreted as meaning that an airline pilot is entitled,
during his annual leave, not only to the maintenance of his basic salary, but
also, first, to all the components intrinsically linked to the performance of the
tasks which he is required to carry out under his contract of employment and
in respect of which a monetary amount, included in the calculation of his total
remuneration, is provided and, second, to all the elements relating to his
personal and professional status as an airline pilot. It is for the national court
to assess whether the various components comprising that worker's total
remuneration meet those criteria.‖
...
―20. The purpose of the requirement of payment for that leave is to put the
worker, during such leave, in a position which is, as regards remuneration,
comparable to periods of work …
―21. …remuneration paid in respect of annual leave must, in principle, be
determined in such a way as to correspond to the normal remuneration
received by the worker. It also follows that an allowance, the amount of which
9
is just sufficient to ensure that there is no serious risk that the worker will not
take his leave, will not satisfy the requirements of European Union law.‖
32. The CJEU then went on to consider the specific payments:
24. Accordingly, any inconvenient aspect [sic] which is linked intrinsically to
the performance of the tasks which the worker is required to carry out under
his contract of employment and in respect of which a monetary amount is
provided which is included in the calculation of the worker's total
remuneration, such as, in the case of airline pilots, the time spent flying, must
necessarily be taken into account for the purposes of the amount to which the
worker is entitled during his annual leave.
―25. By contrast, the components of the worker's total remuneration which are
intended exclusively to cover occasional or ancillary costs arising at the time
of performance of the tasks which the worker is required to carry out under
his contract of employment, such as costs connected with the time that pilots
have to spend away from base, need not be taken into account in the
calculation of the payment to be made during annual leave.
―26. In that regard, it is for the national court to assess the intrinsic link
between the various components which make up the total remuneration of the
worker and the performance of the tasks which he is required to carry out
under his contract of employment. That assessment must be carried out on
the basis of an average over a reference period which is judged to be
representative and in the light of the principle established by the case law …
according to which Directive 2003/88 treats entitlement to annual leave and to
a payment on that account as being two aspects of a single right …
―27. That stated, it must also be pointed out that the court has already held
that an employee, working as a purser for an airline company and transferred,
by reason of her pregnancy, temporarily to ground work, was entitled, during
her temporary transfer, not only to maintenance of her basic salary but also to
pay components or supplementary allowances relating to her professional
status as an employee. Accordingly, allowances relating to her seniority, her
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length of service and her professional qualifications had to be maintained:
see, to that effect, Parviainen v Finnair Oyj (Case C-471/08) [2011] ICR 99;
[2010] ECR I-6529 , para 73. That case law also applies to a pregnant worker
who has been granted leave from work: see Gassmayr v Bundesminister für
Wissenschaft und Forschung (Case C-194/08) [2010] ECR I-6281 , para 65.
―28. It follows that, in addition to the components of the total remuneration set
out in para 24 of the present judgment, all those which relate to the personal
and professional status of an airline pilot must be maintained during that
worker's paid annual leave.‖
33. In the light of the CJEU‘s decision the Supreme Court remitted the case to the
employment tribunal with a direction that the Tribunal should focus on whether there
was a genuine intention in agreeing and making payments exclusively to cover costs
that they should indeed go exclusively to cover such costs. If the payments were
made genuinely and exclusively to cover costs then they would not form part of the
pilots‘ remuneration for the purposes of calculating holiday pay.
The implications of the Williams decision
34. In Williams the pilots‘ holiday pay had to include all the different elements of
remuneration, such as flying pay supplements, and not just basic pay but did not
have to include payments that were made to cover costs.
35. If the purpose for the requirement of paid leave is that an employee should during the
period of leave be in a comparable position to that in which he would be in during
periods of work then it is not surprising that all of the elements of the worker‘s
remuneration should be required to go into the calculation of holiday pay.
36. It was clear that the CJEU‘s decision was unlikely to be confined to pilots and the
aviation industry (although it did result in thousands of applications in the aviation
industry) and that the decision called into question the decision of the Court of
Appeal in Bamsey and the correctness of the interpretation of holiday pay in the
WTR. The decision called into question the correctness of disallowing overtime when
calculating holiday pay.
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37. In the light of the Williams decision it is necessary to consider each element of an
employee‘s remuneration and ―assess the intrinsic link between the various
components which make up the total remuneration of the worker and the
performance of the tasks which he is required to carry out under his contract of
employment.‖
The Neal decision
38. Neal v Freightliner Ltd was a decision of the Birmingham Employment Tribunal dated
12 July 2013. It is being appealed to the Employment Appeal Tribunal. The Neal
decision is a good example of the effect of the Williams decision.
39. Mr Neal claimed that he had been underpaid holiday pay because in calculating the
same his employer had not taken into account overtime. The contractual hours were
7 hours per day. Employees were expected to work between 7 and 8.5/9 hours in
accordance with a locally negotiated agreement but could not be forced to do so.
There was an unfettered right to refuse to work in excess of 8.5/9 hours. Mr Neal had
always worked in excess of 35 hours per week. Mr Neal claimed that his holiday pay
should be paid by reference to his actual normal remuneration rather than his basic
pay and he sought to rely on the Williams decision.
40. The ET decided that the correct basis for the calculation of Mr Neal‘s entitlement to
holiday pay was by reference to his normal earnings which included overtime and
shift premia. The ET had to deal with the Court of Appeal decision in Bamsey and did
so by in effect finding that the Bamsey decision was inconsistent with the decision in
Williams. Bamsey had been referred to briefly with apparent approval (see paragraph
5) when Williams was before the Supreme Court in 2010 but was not cited or referred
to when Williams went back to the Supreme Court in 2012. It might be thought that it
was a somewhat bold ET that decided that a Court of Appeal decision was wrongly
decided. However bold one considers the ET‘s decision it was probably the right
decision in that it appears to accord with the CJEU decision in Williams and
Robinson-Steele and now the Advocate General‘s opinion in Lock.
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The implications of the Neal decision
41. If Neal is upheld in the EAT or subsequently by a higher court the impact will be that
in calculating holiday pay account must be taken of overtime worked even if that
overtime was voluntary.
42. If an employer has consistently failed to take into account overtime when calculating
holiday pay it would be possible for the employee to bring a claim in respect of the
shortfall in holiday pay covering a period of years as the same would be regarded as
a series of deductions and the most recent being the last in that series.
43. It is hardly surprising that there have been a large number of claims filed in respect of
holiday pay where overtime has not been taken into account.
The Lock Opinion
44. The case of Lock v British Gas Training Ltd came before the ET in Leicester which
made a reference to Europe in respect of the proper construction of Article 7 of the
Directive and whether commission had to be taken into account when calculating
holiday pay.
45. Mr Lock was a sales consultant for British Gas whose remuneration comprised a
basic salary together with commission which comprised about 60% of Mr Lock‘s total
remuneration. Mr Lock was paid commission during the period when he was on
holiday but that commission was in respect of sales made at an earlier stage. Whilst
on holiday he would not be making any sales and so in the future he would not
receive any commission for the holiday period because he made no sales during that
period. The question was therefore whether in calculating holiday pay account should
be taken of commission that he would earn during the period when he is on holiday
had he not been on holiday. One of the arguments was that not allowing notional
commission for the holiday period to be taken into account might deter a worker from
taking their holiday entitlement.
46. The ET posed one of the questions in these terms ―does Article 7 ... require that the
Member States take measures to ensure that a worker is paid in respect of periods of
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annual leave by reference to the commission payments he would have earned during
that period, had he not taken leave, as well as his basic pay?‖
47. The Advocate General‘s opinion was delivered on 5 December 2013. The AG‘s
opinion is normally followed by the CJEU although we will have to wait to see
whether it is in this case although I would expect it to be followed.
48. The AG referred to the Evans v Malley decision the effect of which had been that the
employee had not been entitled to be paid a sum equivalent to his average income
from commission for periods when he was on paid annual leave. The AG‘s opinion
was that article 7 required such commission to be included when calculating the
remuneration due to the employee in respect of the paid holiday period. Again
emphasis was placed on the requirement that a worker receive their normal
remuneration for the period of their holiday. ―The purpose of the requirement of
payment for that leave is to put the worker, during such leave, in a position which is,
as regards remuneration, comparable to periods of work.‖
49. The AG referred to the Williams decision and the distinction drawn between
payments made which were linked intrinsically to the performance of the tasks the
worker was required to carry out under the contract of employment and any
components that were intended exclusively to cover occasional or ancillary costs
arising at the time of the performance of the tasks which the worker is required to
carry out under the contract of employment. The former were to be taken into
account when calculating holiday pay but the latter were not. So far as Mr Lock‘s
commission was concerned that was directly linked to the work normally carried out
by him under his contract of employment and had to be included in the remuneration
to which he was entitled during his paid period of annual leave.
Whilst the
commission itself varied from month to month depending on the sales that Mr Lock
achieved commission was permanent enough to be regarded as part of his normal
remuneration: ―it constitutes a constant component of his remuneration‖. The AG
therefore found that there was ―an intrinsic link ... between the commission received
each month by a worker such as Mr Lock and the performance of the tasks he is
required to carry out under his contract of employment.‖
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The implications of the Lock Opinion
50. The implications of the Lock Opinion assuming that the same is confirmed by the
CJEU are very significant indeed. The inclusion of regularly paid commission in any
calculation of holiday pay will add considerably to employers‘ wage costs and will
also open the door to a large number of claims for underpayment of holiday pay in
the past again relying on a claim for deduction from wages and there being a series
of deductions.
51. Employers will have to consider how to accommodate this likely change in the
payment of holiday pay and the inclusion of commission. It would seem likely that
over a period of time variable commission rates will be reduced to take into account
the additional sums that have to be paid.
So where are we with holiday pay?
52. In calculating holiday pay one should look at all the constituent elements of the
worker‘s remuneration. In the light of the decisions referred to above the calculation
of holiday pay should now include overtime and commission and other payments
such as shift allowances. The Williams test is whether there is an ― intrinsic link
between the various components which make up the total remuneration of the worker
and the performance of the tasks which he is required to carry out under his contract
of employment‖.
53. Payments which are meant to cover costs or expenses that the worker incurs in
carrying out his duties under the contract will not have to form part of the holiday pay
calculation.
What to look out for
54. Whilst I would expect the CJEU to follow the AG‘s opinion in Lock clearly the actual
decision is awaited. The appeal to the EAT in Neal will also be eagerly awaited.
55. The main problem that employers are likely to face in the immediate future are large
numbers of claims for under paid holiday pay where the employee relies on a series
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of deductions. Claims still have to be brought within 3 months of the last deduction.
Employers could introduce a no holiday for the next 3 months policy in a hope of
avoiding any claims although that will not assist in relation to holiday taken within the
last 3 months unless a compromise agreement is entered into with the employees.
Some employers may wish to make one off payments in respect of underpaid holiday
pay and to have a settlement agreement in respect of the same. Whether an
employer faces a large number of claims may depend on how active a particular
union is in pursuing such claims but one can certainly expect a large number of
claims during 2014.
P.J Kirby QC
Hardwicke
20 January 2014
Contact us
P.J Kirby QC
www.hardwicke.co.uk/people/pj-kirby-qc
+44 (0)20 7242 2523
[email protected]
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Schedule of relevant legislative provisions
Directive 2003/88/EC of the European Parliament and of the Council of 4
November 2003 concerning certain aspects of the organisation of working time
Article 1
Purpose and scope
1. This Directive lays down minimum safety and health requirements for the
organisation of working time. ...
Article 7
Annual leave
1. Member States shall take the measures necessary to ensure that every worker
is entitled to paid annual leave of at least four weeks in accordance with the
conditions for entitlement to, and granting of, such leave laid down by national
legislation and/or practice.
2. The minimum period of paid annual leave may not be replaced by an
allowance in lieu, except where the employment relationship is terminated.
Working Time Regulations 1998
13.— Entitlement to annual leave
(1) Subject to paragraph (5), a worker is entitled to four weeks' annual leave in
each leave year.
(3) A worker's leave year, for the purposes of this regulation, begins–
(a) on such date during the calendar year as may be provided for in a relevant
agreement; or
(b) where there are no provisions of a relevant agreement which apply–
(i) if the worker's employment began on or before 1st October 1998, on that date
and each subsequent anniversary of that date; or
(ii) if the worker's employment begins after 1st October 1998, on the date on
which that employment begins and each subsequent anniversary of that date.
17
...
(5) Where the date on which a worker's employment begins is later than the date
on which (by virtue of a relevant agreement) his first leave year begins, the leave
to which he is entitled in that leave year is a proportion of the period applicable
under [paragraph (1)] equal to the proportion of that leave year remaining on the
date on which his employment begins.
...
(9) Leave to which a worker is entitled under this regulation may be taken in
instalments, but–
(a) it may only be taken in the leave year in respect of which it is due, and
(b) it may not be replaced by a payment in lieu except where the worker's
employment is terminated.
13A.— Entitlement to additional annual leave
(1) Subject to regulation 26A and paragraphs (3) and (5), a worker is entitled in
each leave year to a period of additional leave determined in accordance with
paragraph (2).
(2) The period of additional leave to which a worker is entitled under paragraph
(1) is—
...
(e) in any leave year beginning on or after 1st April 2009, 1.6 weeks.
(3) The aggregate entitlement provided for in paragraph (2) and regulation 13(1)
is subject to a maximum of 28 days.
...
(6) Leave to which a worker is entitled under this regulation may be taken in
instalments, but it may not be replaced by a payment in lieu except where—
(a) the worker's employment is terminated; or
...
(7) A relevant agreement may provide for any leave to which a worker is entitled
under this regulation to be carried forward into the leave year immediately
following the leave year in respect of which it is due.
14.— Compensation related to entitlement to leave
(1) This regulation applies where–
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(a) a worker's employment is terminated during the course of his leave year, and
(b) on the date on which the termination takes effect (―the termination date‖), the
proportion he has taken of the leave to which he is entitled in the leave year
under [regulation 13] 1 [ and regulation 13A] differs from the proportion of the
leave year which has expired.
(2) Where the proportion of leave taken by the worker is less than the proportion
of the leave year which has expired, his employer shall make him a payment in
lieu of leave in accordance with paragraph (3).
(3) The payment due under paragraph (2) shall be–
(a) such sum as may be provided for for the purposes of this regulation in a
relevant agreement, or
(b) where there are no provisions of a relevant agreement which apply, a sum
equal to the amount that would be due to the worker under regulation 16 in
respect of a period of leave determined according to the formula–
(A × B) − C
where–
A is the period of leave to which the worker is entitled under [regulation 13] 1 [
and regulation 13A] 2;
B is the proportion of the worker's leave year which expired before the
termination date, and
C is the period of leave taken by the worker between the start of the leave year
and the termination date.
(4) A relevant agreement may provide that, where the proportion of leave taken
by the worker exceeds the proportion of the leave year which has expired, he
shall compensate his employer, whether by a payment, by undertaking additional
work or otherwise.
Employment Rights Act 1986 –
220. Introductory.
The amount of a week's pay of an employee shall be calculated for the purposes
of this Act in accordance with this Chapter.
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221.— General.
(1) This section and sections 222 and 223 apply where there are normal working
hours for the employee when employed under the contract of employment in
force on the calculation date.
(2) Subject to section 222, if the employee's remuneration for employment in
normal working hours (whether by the hour or week or other period) does not
vary with the amount of work done in the period, the amount of a week's pay is
the amount which is payable by the employer under the contract of employment
in force on the calculation date if the employee works throughout his normal
working hours in a week.
(3) Subject to section 222, if the employee's remuneration for employment in
normal working hours (whether by the hour or week or other period) does vary
with the amount of work done in the period, the amount of a week's pay is the
amount of remuneration for the number of normal working hours in a week
calculated at the average hourly rate of remuneration payable by the employer to
the employee in respect of the period of twelve weeks ending—
(a) where the calculation date is the last day of a week, with that week, and
(b) otherwise, with the last complete week before the calculation date.
(4) In this section references to remuneration varying with the amount of work
done includes remuneration which may include any commission or similar
payment which varies in amount.
(5) This section is subject to sections 227 and 228.
222.— Remuneration varying according to time of work.
(1) This section applies if the employee is required under the contract of
employment in force on the calculation date to work during normal working hours
on days of the week, or at times of the day, which differ from week to week or
over a longer period so that the remuneration payable for, or apportionable to,
any week varies according to the incidence of those days or times.
(2) The amount of a week's pay is the amount of remuneration for the average
number of weekly normal working hours at the average hourly rate of
remuneration.
(3) For the purposes of subsection (2)—
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(a) the average number of weekly hours is calculated by dividing by twelve the
total number of the employee's normal working hours during the relevant period
of twelve weeks, and
(b) the average hourly rate of remuneration is the average hourly rate of
remuneration payable by the employer to the employee in respect of the relevant
period of twelve weeks.
(4) In subsection (3) ―the relevant period of twelve weeks‖ means the period of
twelve weeks ending—
(a) where the calculation date is the last day of a week, with that week, and
(b) otherwise, with the last complete week before the calculation date.
(5) This section is subject to sections 227 and 228.
223.— Supplementary.
(1) For the purposes of sections 221 and 222, in arriving at the average hourly
rate of remuneration, only—
(a) the hours when the employee was working, and
(b) the remuneration payable for, or apportionable to, those hours,
shall be brought in.
(2) If for any of the twelve weeks mentioned in sections 221 and 222 no
remuneration within subsection (1)(b) was payable by the employer to the
employee, account shall be taken of remuneration in earlier weeks so as to bring
up to twelve the number of weeks of which account is taken.
(3) Where—
(a) in arriving at the average hourly rate of remuneration, account has to be taken
of remuneration payable for, or apportionable to, work done in hours other than
normal working hours, and
(b) the amount of that remuneration was greater than it would have been if the
work had been done in normal working hours (or, in a case within section 234(3),
in normal working hours falling within the number of hours without overtime),
account shall be taken of that remuneration as if the work had been done in such
hours and the amount of that remuneration had been reduced accordingly.
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224.— Employments with no normal working hours.
(1) This section applies where there are no normal working hours for the
employee when employed under the contract of employment in force on the
calculation date.
(2) The amount of a week's pay is the amount of the employee's average weekly
remuneration in the period of twelve weeks ending—
(a) where the calculation date is the last day of a week, with that week, and
(b) otherwise, with the last complete week before the calculation date.
(3) In arriving at the average weekly remuneration no account shall be taken of a
week in which no remuneration was payable by the employer to the employee
and remuneration in earlier weeks shall be brought in so as to bring up to twelve
the number of weeks of which account is taken.
(4) This section is subject to sections 227 and 228.
227.— Maximum amount.
(1) For the purpose of calculating—
(zza) an award of compensation under section 63J(1)(b),
(za) an award of compensation under section 80I(1)(b),
(a) a basic award of compensation for unfair dismissal,
(b) an additional award of compensation for unfair dismissal,
(ba) an award under section 112(5), or
(c) a redundancy payment,
the amount of a week's pay shall not exceed [£450].
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