News Archive for March, 2015

Overtime and the Calculation of Holiday Pay

The right to paid annual leave is an important principle of EU law, the purpose of which is to allow a worker time to rest and enjoy a period of 'relaxation and leisure'. Any reduction in a worker's remuneration in respect of that leave that would be liable to deter them from actually exercising their right to take a break from work is contrary to the objective pursued by Article 7 of the EU Working Time Directive (WTD).

In Bear Scotland Ltd. and Others v Fulton and Others, the Employment Appeal Tribunal (EAT) ruled that employers must include 'non-guaranteed' overtime that is routinely worked when calculating an employee's holiday pay.

Specifically, Article 7 of the WTD should be interpreted so that payments for overtime which employees are required to work but which their employer is not obliged to offer them do count as 'normal remuneration' for the purposes of calculating holiday pay taken under Regulation 13 of the Working Time Regulations 1998 (WTR).

However, the EAT went on to find that this decision only applies to the 20 days' annual leave guaranteed under the WTD, not the additional eight days' entitlement granted under Regulation 13A of the WTR, and claims for unlawful deductions from holiday pay are subject to the three-month limitation period for bringing claims laid down by the Employment Rights Act 1996 (ERA).

This will limit any retrospective liability on the part of employers, particularly as the EAT ruled that additional leave under Regulation 13A should be 'the last to be agreed upon during the course of a leave year'.

In addition, the EAT found that travel time payments that exceed expenses incurred by the worker and are therefore taxable should also be taken into account when calculating holiday pay. Recognising the importance of the issues, the EAT granted the parties leave to appeal to the Court of Appeal on all points on which they lost, but doubted whether anappeal against its main finding as regards guaranteed overtime and normal remuneration would succeed.

The trade union Unite, which acted for the claimants, subsequently indicated that it would not be challenging the EAT's decision with regard to retrospective claims.

In an attempt to bring certainty to this issue and limit the effects on employers of the EAT's decision, the Government laid before Parliament the Deduction from Wages (Limitation) Regulations 2014. The Regulations amend the ERA so as to limit most unlawful deduction from wages claims to the two-year period ending on the date on which the employee's Employment Tribunal (ET) claim is lodged.  This provision will apply to complaints presented to the ET on or after 1 July 2015.

In addition, the Regulations make clear that the right to payment in respect of annual leave under the WTR is not intended to operate in such a way as to provide that right under a worker's contract. It is a separate statutory right.

This case followed on from Lock v British Gas Trading Ltd. and Others, in which the Court of Justice of the European Union ruled that a correct interpretation of the WTD requires that the holiday pay of an employee whose normal remuneration is made up of a basic salary plus variable commission should include an amount equivalent to the sum he would have earned by way of commission had he been working rather than on annual leave.

In the light of these decisions, employers should include non-guaranteed overtime when calculating holiday pay, as well as other payments which constitute a worker's normal remuneration.

We can advise you on your individual circumstances.

Posted by Peter Nicholas on Monday, March 16, 2015 at 04:35 PM

Statutory Pay Rates for 2015/2016

The Department for Work and Pensions has announced the proposed rates for statutory payments that will apply for the 2015/2016 tax year.

The standard weekly rate of statutory maternity pay (SMP), statutory adoption pay (SAP) and statutory paternity pay (SPP) will increase from £138.18 to £139.58 for weeks commencing on or after 5 April 2015.

Employees who qualify for statutory shared parental pay (SShPP) whilst on shared parental leave will be paid at the same rate, or at 90 per cent of their average weekly earnings if this figure is lower.

The weekly statutory sick pay (SSP) rate for days of sickness absence commencing on or after 6 April 2015 will increase from £87.55 to £88.45.

In addition, the lower earnings limit applying to National Insurance Contributions, below which employees are not entitled to SMP, SAP, SPP SShPP or SSP, will increase from £111 per week to £112 per week from 6 April 2015.

Posted by Peter Nicholas on Monday, March 16, 2015 at 04:15 PM

Nuclear Power Workers Suffered Unlawful Wage Deductions

Agroup of nuclear power station workers who did not receive all the benefits due to them after they achieved promotion have convinced the Employment Appeal Tribunal (EAT) that they suffered unlawful deductions from their wages (Goldwater et al v Sellafield Limited).

The group's employment contracts contained a provision whereby they were entitled to receive the pay and conditions attached to their new posts once they had moved to them and in any event no later than six weeks after they were informed of their selection for promotion.

Their employer argued that that clause referred only to their basic pay and not to certain supplements which went with their new positions.

The employer's arguments prevailed before an Employment Tribunal (ET). However, in allowing the workers' appeal, the EAT found that their interpretation of the clause accorded with its natural and ordinary meaning.  The ET's ruling to the contrary was 'unsupportable' and based upon a fallacy.

The decision entitled the group to further substantial payments from their employer to make up for the supplements which they were wrongfully denied.

Contact us for advice on any contractual matter.

Posted by Peter Nicholas on Monday, March 16, 2015 at 04:12 PM