No pain relief for the holiday pay headache

Posted: 22/08/2014

Under regulation 13(1) of the Working Time Regulations 1998 (the WTR), workers are entitled to 5.6 weeks' annual leave in each leave year paid at the rate of a week's pay for each week's holiday. While this may sound straightforward, there are many tribunal claims based on holiday pay calculations because many workers have atypical working patterns and the relevant case law is constantly evolving.

The mechanism under the WTR for calculating entitlement for atypical workers is complex and case law tends to focus on specific factual scenarios which may not be relevant to your own situation.

In this article, Liz Cardy explains a significant ECJ ruling on holiday pay and some of the complications affecting the educational sector.

UK provisions unlawful

In Lock v British Gas Trading Ltd & Others, the ECJ recently made a significant ruling affecting holiday pay for employees and workers who have fixed normal hours but receive variable payments. The court found that the UK provisions which allow employers to limit statutory holiday pay to basic salary only are unlawful.

Term time employees

Many educational institutions have employees who only work during term time and automatically take their holiday entitlement during the school holidays. The holiday pay calculations will therefore be quite different from other employees taking their annual entitlement under the WTR. 

Normally, an employee would only be entitled to take holiday once they have accrued enough days - unless their contract says otherwise. However, accrual of holiday is less relevant to an employee who works during term time as their holidays will be governed by term dates rather than by how much holiday they have accrued. That said, accrual of holiday entitlement is still relevant for the purposes of determining outstanding pay or deductions from pay on termination of employment.

There is no reason why an employer cannot calculate how many days' holiday accrue according to how many weeks' holiday the employee is entitled to for the whole year. For example, if an employee has 13 weeks' holiday during the year, their holiday will ‘accrue’ at a rate of 5.4 days a month, assuming that they work full-time during the other 39 weeks in the year.

Alternatively, it may be appropriate to calculate holiday entitlement based on hours. So an employee working the equivalent of five days a week, for eight hours a day, and who is entitled to five weeks' holiday, will be entitled to 264 hours' holiday (the equivalent to 25 days' holiday and eight public holidays).

Visiting teachers

In one case, Gee and others v Governing Body of the Haberdashers Aske’s Boys’ School, the Employment Tribunal (ET) decided that visiting teachers' pay, where the visiting teachers were on holiday for 22 weeks of the year but were paid over 12 months included an element of holiday pay because their hourly rate was derived from a full-time teacher's hourly rate which included holiday pay. Therefore the fact that the teachers' pay varies depending on the hours they work does not mean that their pay does not contain an 'appropriate element of holiday pay' provided that there is a link to an annual rate of pay. The result was that the teachers were being paid holiday pay during periods of annual leave regardless of whether they worked in that particular month.

Part-time workers

The calculation of holiday entitlement for part-time workers is the same as full-time workers but will be pro-rated according to the number of days or hours worked. The individual will also be entitled to a pro rata number of bank and/or public holidays.

The Government has published some guidance on calculating the holiday entitlement for workers with other types of irregular working hours but this is quite basic and unlikely to resolve detailed queries and concerns. Sadly, much like the common cold, there is still no known cure for the holiday pay headache.

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