Employment law

Holiday pay

Blackburn & others v Gridquest Ltd (t/a Select Employment) and others (2002) IRLR 604

The Court of Appeal allowed an appeal against a decision of the Employment Appeal Tribunal (EAT), reported at (2002) IRLR 168.

The EAT had held that if an employee's weekly rate of pay was 'in fact' a 'rolled-up' rate inclusive of an element of holiday pay, then notwithstanding that there was no contractual term to that effect, credit must be given for that element against any holiday pay due under the Working Time Regulations 1998.

The Court of Appeal held that the EAT was wrong to distinguish between the total remuneration paid to a worker under the contract and a 'week's pay'.

An employer cannot unilaterally decide that a week's pay is a payment not only for the hours worked during the week, but also includes an element of holiday pay.

A week's pay is the amount payable by the employer under the contract for the normal hours in a week.

The weekly payment can only be said to include an amount for something else, such as holiday pay, if that is agreed between the employer and employee.

To say that holiday pay was 'in fact' paid amounts to saying that the employer can decide unilaterally what is included in the weekly payment and reg.16(5) of the Regulations does not confer that right upon an employer.

Rather, it refers to the 'contractual' remuneration paid in respect of a period of leave.

Leisure Leagues UK Ltd v Maconnachie (2002) IRLR 600

The EAT held that a tribunal correctly calculated an employee's daily rate of pay for the purpose of accrued holiday entitlement by dividing his annual salary by the number of working days in the year, rather than by the number of calendar days.

To calculate payment for accrued holiday entitlement, the concept of 'day-to-day accrual' must refer to the number of working days in the year, not the number of calendar days.

An approach based on calendar days is at odds with the almost universal practice in industry and would mean that holiday pay would often accrue at a rate less than the statutory minimum wage.

The EAT said that would be 'an absurd situation which contradicts the entire purpose of the relevant legislation'.

Although the 'calendar days' approach was endorsed by the EAT in Thames Water Utilities v Reynolds (1996) IRLR 186, that case pre-dated the Working Time Regulations 1998, 'which provide the paradigm for provisions in respect of payment in respect of periods of leave' and 'take as their working assumption the hours actually required to be done'.

But as the editor of the IRLR said, the EAT did not refer to the decision in Taylor v East Midlands Offender Employment Consortium (2000) IRLR 760, in which the Thames Water Utilities approach was followed even after the Working Time Regulations came into force.

By Martin Edwards, Mace & Jones, Liverpool