Mr N worked as an operative and his employment contract provided for a 35-hour week consisting of seven-hour shifts. However, it stated that he “may be required to work overtime when necessary”.
Mr N actually worked 8.5 or 9 hour shifts (as set out by the roster) and occasionally 12-hour shifts to cover for colleagues.
Mr N’s employer paid him basic pay (i.e. 35 hours a week) for his annual leave. This basic pay did not include any allowance for overtime.
Mr N claimed for his holiday pay in accordance with the Working Time Directive (which refers to 4 weeks’ holiday, rather than the full 5.6 week entitlement required by UK law) to be calculated with reference to all the hours that he worked, including weekend work, night work and overtime.
The Employment Tribunal’s decision
The Employment Tribunal upheld Mr N’s claim.
The Employment Tribunal referred to recent case law and in particular the notion that a worker’s entitlement to receive normal remuneration during annual leave is so that he is in a position as regards remuneration which is comparable to periods of work.
The Employment Tribunal indicated that it did not matter that Mr N might have volunteered to undertake the overtime, commenting that the employer controls the terms upon which work is offered at the outset of employment and subsequently with regard to overtime. This meant that an employer could prevent excessive hours being worked.
Mr N was able to claim back to 2007 for arrears of holiday payment.
What does this mean for employers?
Employers should calculate holiday pay, for at least 4 weeks of the employees’ annual leave entitlement, to include overtime and/or other allowances that the employee is usually paid. This includes voluntary overtime.
If employers do not calculate holiday pay in this way, there is a risk that an employee will bring a claim for unlawful deductions from wages, seeking the difference between their holiday pay paid and the amount they should have been paid if other allowances had been included in the calculation, going back for a period of up to 6 years.
If employers carry this out for only a 4 week annual leave period, this may of course, be an administrative nightmare, so employers may decide to calculate the whole amount of any holiday pay to include all other allowances.
However, employers should also bear in mind that this was only the decision of an Employment Tribunal and it may be that the Employment Appeal Tribunal or Court of Appeal would have a different view on the matter. This case is unlikely to be the final word on this subject.
Case: Neal v Freightliner Ltd ET/1315342/12
Hazel Robbins, Solicitor
For more details about this case or calculating holiday pay please contact:
+44 (0) 1604 871143
This update is for general guidance only and does not constitute definitive advice.