The current position in respect of calculating holiday pay could cause widespread financial damage at a time when housing providers are under increased pressure to demonstrate value for money, one way of which is through saving costs. In particular, housing providers are more frequently expecting workers to be on-call for emergency housing repairs, perhaps to assist with delivering high tenant satisfaction, or are including performance related pay or productivity bonuses as a way of retaining and motivating the workforce.
However, how far should the decision lead you to change the approach to the calculation of holiday pay where overtime, premium payments and commission may be paid to your workforce?
Under UK law, a worker is entitled to 5.6 weeks' (28 days) annual leave in each leave year, made up of 4 weeks' EU entitlement and an additional 1.6 weeks' granted by UK law. On top of this, it is not uncommon for housing providers to allocate further days of holiday on a contractual basis to employees. Whilst legislation confirmed that holiday pay should be based on a week’s pay, it did not historically set out what should be included within that payment. UK law was therefore at a point where workers were paid based on a week’s ‘normal remuneration’. Overtime and commission were not historically viewed, and therefore not calculated, as part of ‘normal pay’ for a worker.
The case of Bear Scotland v Fulton changed this. It is now accepted that ‘normal remuneration’ can include payments for overtime which a worker is required to work, but which an employer is not obliged to offer. Further, and more importantly, overtime should also be taken into account when calculating a week's pay when payments for such overtime form part of ‘normal pay’.
As the decision impacts most upon those who have normal working hours but receive a variation in their pay, perhaps because of the type of work carried out or where they work more than their contacted hours, it is crucial to determine what is regarded as ‘normal pay’ to ensure the correct and consistent approach to the treatment of such payments. The impact of the decision turns on the assessment of whether the work is regarded as:
It will also be worth assessing whether there has been a break of more than three months between successive underpayments, potentially limiting back-pay liabilities.
On the back of the judgment therefore, going forward, it will be important to give careful consideration to the individual circumstances of overtime, on call or bonus payments made to consider whether your holiday pay arrangements could come under close scrutiny. Whilst it is anticipated that Regulations from the government are likely to limit underpayments to the last two years, these Regulations are not expected to come into force until 1 July 2015 and immediate action is advisable.
Contact Kate Watkins.
The Government has announced its intention to lift the shielding requirement for extremely vulnerable people. Katherine Sinclair and Libby Hubbard discuss...
The Corporate Insolvency and Governance Act 2020 has now received Royal Assent. It applies to most companies as well as Limited Liability Partnerships.
The latest development in the long history of sodium valproate was the publication of The Independent Medicines and Medical Devices Safety Review today
Failure to provide minimum pension contribution protection following a TUPE transfer can end up costing a lot more than if provision had been made.
More than 700 people were consulted about their experiences of pelvic mesh, Primodos and an epilepsy drug called Sodium Valproate.
Making an application to the Court of Protection to make or change a Will for someone who is not able to do this themselves due to lacking mental capacity.
The online divorce system is a fantastic facility available to both legal professionals and litigants in person.
In a comprehensive judgement, the High Court rejected a challenge by Stagecoach to the procurement of new franchises for the South Eastern, East Midlands and West Coast rail lines.
With lockdown restrictions further lifting on 4 July, charities have a lot to think about.
We have advised a number of families, alongside Ms Ockenden’s review, in relation to concerns as to the care and treatment provided by maternity services at Shrewsbury and Telford Hospitals Trust.
To receive invitations to our events, as well as information and articles on legal issues and sector developments that are of interest to you, please sign up to Newsroom.