Operational efficiency HR toolkit
Legal-ease
Holiday-season recap:
Paid leave entitlement
Most workers in the UK have the
right to 5.6 weeks’ paid leave under
the Working Time Regulations
1998 (WTR).
The WTR state that a worker is
entitled to be paid ‘a week’s pay for
a week’s leave’. However, the
calculation of a week’s pay is within
yet another piece of legislation: the
Employment Rights Act 1996 (ERA).
The situation has been further
confused in recent years by various
court decisions, culminating in
BEAR Scotland and others v Mr
David Fulton and others. This case
determined that UK domestic law
has failed to apply the requirements
of the EU Working Time Directive
(EU WTD).
In particular, the UK’s week’s pay
rules do not provide workers with
their EU holiday pay entitlement,
which should be based on their
‘normal remuneration’.
The situation we are left with,
therefore, is not a straightforward
one. The period of leave provided
to workers under the EU WTD is
four weeks. Pay for this period
must now be determined in
accordance with the decision in
BEAR Scotland. However, any
remaining weeks of holiday (being
on a statutory basis 1.6 weeks) are
assessed under the usual UK weekly
pay rules.
For workers on a settled pattern
of work the amount of holiday pay
should be fairly easy to establish.
For those who are not the
preceding 12 weeks provides the
relevant reference period. Any
payment to be claimed has to be
‘regular’ and also have a direct
link to the work carried out.
This has resulted in numerous
cases arguing what should and
should not be included within
‘normal remuneration’.
The position presently is that the
following kinds of payments should
all be included for the purposes of
calculating holiday pay:
Non-guaranteed overtime
(where the employer is not obliged
to provide the overtime, but
the worker is obliged to work it
if requested).
Voluntary overtime (if
sufficiently regular).
Results-based commission (or
similar payments).
Incentive- or performancebased
bonuses.
Overtime pay (whether
guaranteed or not, whether
compulsory or not).
Standby, shift or call-out
payments.
Travel and other allowances
treated as taxable remuneration.
The question then arises
regarding what happens if a worker
doesn’t take holiday leave? Workers
in the UK are required to ‘use it or
lose it’ in the relevant leave year.
But is the entitlement to holiday
pay dealt with similarly if the leave
hasn’t been given or taken?
There is conflicting case law on
this point, but the present thinking
is that workers are only entitled to
statutory holiday pay if they
actually take the statutory holiday
or give notice to their employer
that they wish to take such holiday.
The position being that if
workers were able to receive
statutory holiday pay without
taking the time off, this could
create a financial incentive for them
not to exercise their holiday rights,
and so would be contrary to the
purpose of the law.
Andrea London is a partner
and head of the employment
department at Fletcher Day
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44 HR June 2019 hrmagazine.co.uk
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