Overtime should count towards Holiday Pay rules Tribunal!

Yesterday, the Employment Appeal Tribunal ruled that overtime should count towards an employee’s holiday pay. This could see up to 5 million employees claiming back holiday pay!

In August, Kubo blogged about the differences in annual leave across the world and discovered that it varies greatly from country to country. More surprisingly, America had no official rule on holiday and it was down to the individual companies Annual Leave policy.

In the UK, it is a minimum requirement that a worker receives 5.6 weeks annual leave, so with an average working week of 5 days, that is 28 days a year (which can include bank holidays). Workers that are required to work overtime as a regular part of their job argue that they should receive extra holiday pay for the overtime time worked.

The ruling may be referred to the Court of Appeal, which means it could be years until a final decision is made. The firms involved in yesterday’s judgement have been given permission to appeal the decision at the Court of Appeal. When asked if they are going to appeal a spokesman for the firms said they are "considering their options".

After the hearing, Business Secretary Vince Cable said "Government will review the judgment in detail as a matter of urgency. To properly understand the financial exposure employers’ face, we have set up a taskforce of representatives from Government and business, to discuss how we can limit the impact on business. The group will convene shortly to discuss the judgment"

What was the tribunal about?

Yesterday’s ruling followed an appeal by Bear Scotland, a road construction and maintenance firm, against an earlier decision by an employment tribunal. The tribunal found Bear Scotland had made unauthorised deductions from the wages of two employees, David Fulton and Douglas Baxter, by failing to include overtime and other payments associated with their work in calculating the holiday pay they were entitled to.

Two separate companies, Hertel and Amec, also appealed a decision stating they had made unauthorised deductions from wages of employees working on a construction site at West Burton in England, by failing to include overtime when calculating holiday pay. As the cases raised the same issues, they were heard together at the Employment Appeals Tribunal.

All three cases centred on the right to paid holiday under the Working Time Regulations 1998, now the Working Time Directive 2003, which states: "A worker is entitled to be paid in respect of any period of annual leave to which he is entitled, at the rate of a week's pay in respect of each week of leave."

Back dated claims

There were concerns that the business sector could be crippled by pay outs on back dated claims from employees. As a result, backdated claims have been limited. The tribunal ruled that employees cannot claim more than three months after the last incorrect payment. This still means that businesses could suffer a real blow and potential job losses could occur as a result, as 23% of men and 12% of women working full time regularly work overtime.

Kate Hodgkiss, partner at DLA Piper Scotland LLP, which represented the firms said, “Those carrying out non-guaranteed overtime, which is offered by an employer on a contractual basis, are more likely to have an entitlement claim as they could argue this is normal remuneration. However, those who perform overtime on an ad hoc basis are under no obligation to do this, meaning it's not part of the normal remuneration package, therefore, they're less likely to have an entitlement to claim." 

What do you think? If your job requires you to work beyond your contracted hours should this be taken into consideration when your holiday pay is calculated? After all, if you take holiday on a day where you would normally work overtime, you would lose out on the overtime pay for that day, if it is not included in your holiday pay. Or do you think that you should see overtime as a bonus and not as part of your basic pay?

Kubo would love to hear your thoughts on this, so get in touch!

Part 1 Annual leave- How do Holiday entitlements vary across the globe?

We all enjoy taking time off to spend time with our family and friends for the odd day or a couple of weeks at a time, but how does the holiday entitlement vary between countries and how does it affect how people use their holiday?

 

 

 Finland, Brazil, France and Germany are at the top, guaranteeing six weeks of time off including some bank holidays, with most other European countries enjoying 4-5 weeks holiday off a year.

In Hong Kong the entitlement is only 7 days for your first 2 years of service and India and Japan the entitlement on average is 10-12 days a year!

What I found most surprising was America have 0 yes that's ZERO days statutory minimum! It is left to the employers to offer paid holiday as part of the benefits package. Larger companies will typically offer between 10 and 20 working days, depending on the company and years of service. In addition to this some may offer a number of paid public holidays, typically 6-8, although smaller employers may offer no holiday at all! The average number of paid holiday days offered by private employers is 10 days after 1 year of service, 14 days after 5 years, 17 days after 10 years, and 19 days after 20 years!

So how does this affect how people take their holiday entitlement?
Some U.S. companies don't like employees taking off more than one week at a time. Others expect them to be on call or check their e-mail even when they're lounging on the beach or taking a hike in the mountains. In Europe its common for people to take off 3 consecutive weeks during the summer. Having said that some companies in Europe still have the summer shut down during the hot months and employees are told when to take time off.

The way America views annual leave and the way Europe sees it poses lots of questions. Is it healthier for staff to take a break and relax for a couple of weeks and come back refreshed, or is it better to take odd days here and there and avoid the build up in work (and therefore stress) that awaits you when you arrive back in the office after 2 weeks away?

The other question that springs to mind when thinking about the way people take holiday, is that if you are constantly thinking about work and not taking genuine time off, does your home life suffer? Or are you more likely to burn out quickly professionally?

In part 2 of my blog I will be investigating how different people across the world choose to spend that precious annual leave.

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Tribunal rules commission must be included in holiday pay

Workers whose total pay package relies heavily on commission will have this reflected in their holiday pay, following a ruling in favour of an employee in a tribunal.

In the case of Lock vs. British Gas Ltd. and others, the Court of Justice for the European Union (CJEU) ruled that the employer must take into account Mr Lock's full remuneration package, including commission, when calculating holiday pay. 

Lock was represented by Unison in the case against British Gas. Unison general secretary Dave Prentis hailed the ruling as "extremely important".

"This will assist workers across the European Union to argue that they should be entitled to their normal pay, including any commission payments they normally receive, for periods of annual leave," he said. 

Ben Gorner, employment partner at DLA Piper said the ruling could put companies under serious financial pressures, especially SMEs. "People can backdate their claims, in some instances by up to 10 years," he said. "For a small company with several employees who have worked on commission for some time, this could spell serious trouble."

Brief details of the case

Mr Lock is a sales consultant for British Gas receiving a basic salary and variable commission on a monthly basis. His commission makes up about 60% of his pay. The amount of commission varies depending on the number and type of sales he achieves, paid at the time the sales contract is entered into and not when Mr Lock actually carries out the work to achieve the sale.
Mr Lock took holiday from 19 December 2011 to 3 January 2012 during which time he was paid basic pay and the commission he had earned on sales contracts entered into in the previous weeks. However, as he did no work during his holiday, he did not generate any sales and therefore his salary was lower in the months following him taking holiday as he received no commission, and therefore he "lost" income by taking his holiday. Mr Lock brought a claim for his "lost" holiday pay in the Employment Tribunal. The question of whether commission should be included in holiday pay and, if so, how this should be calculated, was referred to the Court of Justice of the European Union ("CJEU") by the Employment Tribunal.
The CJEU has now confirmed that the holiday pay required under the Directive is to enable a worker to actually take the leave to which he is entitled, and that commission such as that received by Mr Lock should be included in the calculation of holiday pay, since it is directly linked to the work he normally carries out. Although the amount of Mr Lock's commission varies on a monthly basis, it is nevertheless permanent enough to be regarded as part of his normal monthly pay. However, the Court has left it to Member States to decide on how that holiday pay should be calculated.

Will this make a big difference to how you take time off? Will it make it easier for you to take annual leave knowing you are not going to be financially worse off the following months? Kubo would love to know your thoughts on this!