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Holiday Pay

The Working Time Regulations 1998 provides that a worker must receive a week's pay for a week's holiday. Recent cases have sought to determine "a week's pay", and we discuss those cases below.

Bear Scotland Ltd and others v Fulton and others UKEAT/0047/13 ("Bear Scotland")

The EAT's decision in Bear Scotland Ltd and others v Fulton and others UKEAT/0047/13 held that holiday pay under regulation 13 of the Working Time Regulations 1998 must be calculated so as to include non-guaranteed overtime. See our earlier advice in respect of Bear Scotland Ltd here.

Williams and others v British Airways plc (Case C-155/10) ("Williams")

In Williams, it was held by the ECJ that pilots' holiday pay entitlement under the Aviation Directive should correspond to "normal remuneration" and not be limited to their basic salary. This means that pilots should be entitled to holiday pay in respect of the below in addition to their basic salary:

1. Remuneration that is linked intrinsically to the performance of tasks which they are contractually obliged to perform; and

2. Payments that relate to their professional or personal status.

The ECJ also ruled, however, that remuneration intended to cover additional costs arising at the time of the performance of contractual duties need not be taken into account.
Although Williams concerns the Aviation Directive, the ECJ rules that the same principles applied to the Working Time Directive. The subsequent case of Lock v British Gas Trading Ltd applied that decision to the Working Time Directive.

Lock v British Gas Trading Ltd (Case C-539/12) ("Lock")

In this case, the ECJ held that holiday pay under the Working Time Directive must be reflective of a worker's actual remuneration in respect of commission.

A calculation based on salary alone where the worker's normal remuneration included commission determined with reference to sales achieved will not be sufficient. If commission is not taken into account when calculating holiday pay the worker will be financially disadvantaged when taking statutory annual leave, as no commission will be generated during their holiday. This could lead workers to be put off exercising their right to annual leave, which is contradictory to the very purpose of the Working Time Directive.

Advice for Employers

When looking at what should be included in holiday pay under the Working Time Directive, the following must be included:

  • Payments linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment (for example, commission and overtime); and
  • Payments which relate to the professional and personal status of the worker.

For further advice into the implications of these cases, please contact us.

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