The Lifeline Project was a well-regarded charity. Failure to carry out the targets within the contracts led the charity into insolvency and resulted in a personal, 7-year disqualification order.
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? This issue is also relevant to the workforce of contractors, joint ventures and trading companies with whom a Council may be engaged. Care needs to be taken when drafting TUPE clauses that cover this issue.
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 employers 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:
- guaranteed compulsory work (where any payments for that work, including overtime pay, commission or bonus earned, must form part of the holiday pay as these payments are regarded as normal remuneration and intrinsically linked to the performance of the tasks which the worker is required to carry out);
- non-guaranteed compulsory work (where any payments for that work, including overtime pay, commission or bonus earned, must form part of the holiday pay, but the calculation is dependent on thereference period the employer chooses);
- voluntary additional work (where overtime payments should be included in holiday paywhen that overtime forms a ‘settled pattern’ for workers, or when payments are made to workers so frequently that it could be deemed to form part of normal pay; or
- sporadic overtime arrangements with no regular pattern (where it is possible to argue that payments are not settled, nor regular and therefore should not be included).
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 holiday pay arrangements could come under close scrutiny, particularly by employers who may be assessing their holiday arrangements following the ruling. 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.
For more information
Contact Kate Watkins.
On 23 July, trainees from Anthony Collins Solicitors will host an ‘experience day’, which will involve various activities and presentations, with lawyers and non-lawyers from across the firm.
The Office of the Immigration Services Commissioner (OISC) has launched a new scheme specifically for charities and not-for-profit organisations who want to advise EU citizens on UK settlement.
In the second part of our series on contract management pitfalls, we look at the risks and opportunities presented by payment mechanisms in construction contracts.
Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
The UK Government has been consulting on how it should promote social value in its procurements. Here is our response that we submitted to the consultation...
The Tenant Fees Act 2019 came into force on 1 June 2019.
A recent case in the Court of Appeal will no doubt bring a sigh of relief for employers, but a corresponding sigh of disappointment may be uttered for equality and gender balance in the workplace.
This briefing assists response to the consultation paper by outlining the consultation questions, providing some background information and prompting some thoughts and potential answers.
A report published on 29 May by the Institute for Fiscal Studies (IFS) has found that since 2009-10, local government spending on services has fallen on average by 21% in real terms.
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.