Working time and holiday pay

Employment Tribunals (ETs) have made heavy weather of the
provisions in the Working Time Regulations (WTR) relating to holiday
pay. No one doubts that workers are entitled to payment, and many
agencies include a sum in respect of that pay with normal “wage”

Conflicting results have arisen from applications to ETs, on the
one hand indicating that inclusive payments are not legal, and on the
other hand indicating they are. To the rescue comes the Court of Appeal,
which has indicated that if the parties agree that pay includes holiday
pay then it can be held to be a valid arrangement. The lesson from this
is that you should not include payment for holidays within the normal
pay rate unless you have the worker’s express agreement, or you want to
run the risk of a claim.

However, this particular sea is murkier than first appears. A
recent decision makes it clear that if you overpay an amount in respect
of holidays you cannot recover the overpayment by deduction from future
payments unless the worker consents.

In addition, a worker appears to be entitled to payment for any
leave not taken in the leave year. This is despite the fact that the WTR
states that a worker cannot carry leave not taken in one year over to
the following year, and payments “in lieu” are not allowed except upon
termination of the contract. This last decision appear to mean that a
worker could work for 52 weeks of the year and still be entitled to a
further 4 weeks holiday pay. In my book, this amounts to payment in lieu
and counters the spirit of the Regulations by discouraging workers from
taking holidays! It has also been decided that in certain circumstances
a worker can claim sums due for years gone by, assuming an application
is made within 3 months of the end of the last leave year.

Furthermore, it was recently held that a worker on long term sick
leave is still entitled to paid holidays even though the worker was not
entitled to contractual pay whilst sick! As if that is not enough, the
EU’s recent complaint to the UK that it has failed to implement the
Working Time Directive correctly, including in relation to holidays,
means there are likely to be more regulations to come. As in Ireland,
those regulations will probably include an obligation upon the employer
to require the worker to take holidays – an impossible task?

Keep your hatches battened down and get your contracts right.

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