Source: https://www.hr-inform.ie/employment_law/holiday-entitlement-and-pay
Timestamp: 2020-03-29 15:11:43
Document Index: 57620082

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Employees are entitled to a minimum paid annual leave entitlement of four weeks under the Organisation of Working Time Act, 1997 calculated in one of a variety of methods. Employers are permitted to offer holiday entitlements in excess of this amount and entitlements must be set out in the employee's written statement of terms and conditions. There are also a number of Public Holidays and Church Holidays which carry qualifying conditions if leave is to be taken. Holiday pay is payable at the employee's normal pay rate and is to be paid in advance of the holiday. If employees' pay fluctuates because of their particular pattern of work, an average of pay is to be taken over the preceding 13 weeks in order to reach a value for holiday pay.
Many employers adopt rules for the booking of annual leave in order to ensure that operational requirements are maintained to an acceptable level eg placing a cap on the number of employees who may be on leave at any one time. However, employers must take into consideration an employee's need to reconcile work with any family responsibilities and the need for rest and recreation.
The Organisation of Working Time Act, 1997, (the Act) in relation to annual leave, is applicable to all sectors both private and public with the exception of Garda Síochána and Defence Forces.
Qualifying for annual leave
Under the Act, there is no qualifying period for an entitlement to annual leave meaning it applies from day one of employment.
All time worked, including overtime, entitles an employee to paid annual leave.
Employees on protective leave including maternity leave, additional maternity leave, paternity leave, adoptive leave, additional adoptive leave, any maternity leave remaining to which the father is entitled in the case of the death of the mother, health and safety leave, jury duty, parental leave, force majeure leave and the first 13 weeks of carer’s leave, retain their annual leave entitlements.
Time worked on public holidays should also be counted when calculating annual leave entitlements.
Time spent on annual leave itself should be counted when calculating an employee’s annual leave entitlement, based on the hours an employee would have worked, had they not been on annual leave. Based on a European Court of Justice ruling in January 2009 and the Workplace Relations Act 2015, employees should continue to accrue statutory annual leave while absent on sick leave or from an occupational injury.
Where an employee is placed on short-time ie working hours or pay are temporally reduced by 50% or more, annual leave entitlement will be based on actual hours worked.
Employees do not accrue annual leave while on a temporary lay-off, an absence by strike, a career break or during a period of unpaid leave.
For the purpose of the Organisation of Working Time Act, 1997, the leave year runs from 1st April to 31st March each year. However, there is no restriction on employers using a different 12 month period provided the same leave year is used consistently. For example, many employers have amended this in order for their leave year to run from 1st January to 31st December each year.
Under the Organisation of Working Time Act, 1997 employees have their holiday entitlement calculated in one of the following ways:
For example, an employee works Monday to Friday, 9am to 5.30pm = 37.5 hours per week worked excluding breaks.
37.5 x 52 = 1,950 hours worked in the leave year. Therefore he/she is entitled to four weeks annual leave (in this case, 20 working days holiday entitlement).
For example, an employee works Monday to Thursday, 9am to 5.30pm = 30 hours per week worked for a period of 6 months. 30 x 4 weeks = 120 hours worked per month for 6 months. Therefore he/she is entitled to 1/3rd (1.33 days) of a week for each month worked i.e.1.33 days x 6 months = 7.98 rounded up to 8 days holidays.
This formula is used primarily for part-time employees who work less than the hours in either of the above cases. But it can also apply to employees that leave an organisation during the year, or those that join the organisation during the year. They will be entitled to 8% of the hours worked as their annual leave entitlement.
For example, an employee works Monday to Friday 9am to 1pm on a part time basis. Therefore he/she works 4 hours per day x 5 days per week = 20 hours per week. 20 hours per week x 52 weeks =1,040 hours worked per year by 8% = 83.2 hours rounded up to 83.5 hours holiday entitlement.
Timing and payment
When the employer is determining the times at which an employee will be granted annual leave, the employer must consider the employee’s need to reconcile work and any family responsibilities coupled with the employee’s need for rest and recreation.
The employer must consult with the employee or his/her trade union not later than one month prior to the commencement of the leave. The employer must also ensure that the employee is granted the leave in the leave year to which it relates or within six months.
An employee who works for an employer for a continuous eight month period shall be entitled to an unbroken period of two weeks’ annual leave.
Employees are entitled to be paid for annual leave before the leave takes place and at the normal rate of pay. In instances where the board and lodging constitute part of the employee’s remuneration this will not be received while the employee is on annual leave.
Entitlements in respect of Public Holidays
There are nine public holidays that fall in each calendar year as follows:
Stephen’s Day (December 26th)
Any other day or days prescribed for the purpose.
All full time employees have an immediate entitlement to a public holiday benefit.
Where an employee is terminating their employment in the week before the public holiday is due to fall, he/she is entitled to receive payment for that public holiday, equal to what they would have received had they remained in work. An employee is not entitled to benefit from a Public Holiday in the event that they are absent due to the following circumstances:
an absence in excess of 52 weeks by reason of an occupational injury
an absence in excess of 26 weeks by reason of illness of injury an absence in excess of 13 weeks by reason not referred to above but being
an absence authorised by the employer, including layoff
an absence by reason of a strike
an absence by reason of being placed on health and safety leave.
There are five sets of circumstances in which an employee will not be entitled to a Public Holiday. These are as follows:
he/she is absent for a period of 52 weeks (or more) due to an occupational injury
he/she is absent for a period of 26 weeks (or more) due to illness or injury
he/she is absent for a period of 13 weeks (or more) not in relation to (a) or (b) except in the case of authorised absence by the employer including lay off excluding maternity leave, adoptive leave or parental leave
he/she is absent due to a strike
he/she is absent owing to being placed on Health & Safety Leave.
Part-time employee entitlement to Public Holidays
Employees who are not full-time have to fulfil the following criteria to obtain a public holiday benefit. They must have worked for the employer concerned for at least 40 hours in the preceding five weeks ending on the working day before the public holiday.
Employees who meet this criteria and who normally work on the day in which the public holiday falls are entitled to one of the benefits outlined below, based on the number of hours he or she would normally work on that day.
If the employee so requests, no later than 21 days before the public holiday, the employer must inform the employee which of the above arrangements will apply no later than 14 days before the holiday. If the employer does not specify the arrangements on time, the employee will receive a paid day off on the public holiday. Employees meeting this requirement, but who do not normally work on the day the Public Holiday falls, are entitled to one fifth of the benefit based on their normal working week. For example an employee who works 20 hours per week from Tuesday to Friday is entitled to 4 hours benefit for a public holiday that falls outside of these days (see below for employee entitlements for a public holiday).
Examples of pay for Public Holidays
An employee on reception who works 37.5 hours per week Monday through to Friday is requested to work the May Bank Holiday Monday. The employee is entitled to be paid for the day at their basic rate (unless their terms and conditions allow for a higher rate) as well as receiving one of the following:
a paid day off within one month
An organisation hires a part-time receptionist working 20 hours a week (5 hours per day Tuesday through to Friday). The receptionist is not required to work the May bank holiday.
The employee is entitled to the following payment 5 hours per day x 4 days =20 hours per week 20 hours per week x 5 weeks = 100 hours worked in the preceding 5 Weeks.
Payment due for the bank holiday = 4 hours, i.e. 1/5th of his/her working week.
An employee ceases employment the Friday prior to the May bank holiday. On calculation of the final payment a normal day's pay is payable by the business with whom the employee was employed the week prior to the Public Holiday.
The Act provides for the following Church Holidays:
6 January, except when it falls on a Sunday
15 August, except when it falls on a Sunday
1 November, except when it falls on a Sunday
8 December, except when it falls on a Sunday
An employer may for the purpose of fulfilling any relevant obligation under the Act treat as a Public Holiday in lieu of a Public Holiday:
the Church Holiday falling in the same year immediately before the Public Holiday
the Church Holiday falling in the same year immediately after the Public Holiday.
The Workplace Relations Act (Commencement) Order 2015 provides that statutory annual leave entitlement accrues during a period of certified sick leave, and for an increase in the annual leave carryover period from 6 months to 15 months for employees who could not, due to illness, take annual leave during the relevant leave year or during the normal carryover period of 6 months.
The amendments provide, in the event of termination of employment, for payment in lieu of annual leave which was untaken as a result of certified illness in circumstances where the employee leaves the employment within a period of 15 months following the end of the leave year during which the leave entitlement accrued.
It is important to note that this decision and the Workplace Relations Act 2015 only apply to statutory annual leave and do not apply to additional or other leave i.e. service days or company leave. As there is a cap on how much annual leave can be earned by an employee in one year, sporadic and low-level absences from work will not affect a person's annual leave entitlement over a year. However, where a person is on long-term absence from work, this ruling may have a significant cost-increasing effect for employers. Therefore, it is advisable that long periods of absence are tightly managed to ensure that the employee either successfully returns to the workplace or there is sufficient evidence to warrant termination of the contract of employment on the grounds on "incapability".
The Act stipulates that sickness (covered by a medical certificate) while on annual leave is not counted as part of holiday leave.
Holiday and termination of employment
The Organisation of Working Time Act, 1997 gives an employer the right to schedule annual leave for employees as long as one month’s notice is given by the employer as to when the annual leave is to be taken.
This also applies during a period of notice. The company can choose whether:
to schedule an employee’s annual leave to be taken during the notice period
to allow an employee to take annual leave during their notice period (where the employee has applied to do so)
to refuse an employee’s application to take the leave during the notice period and provide payment for the leave in the final wage payment instead.
This should be managed in a consistent way based on objective business requirements, to avoid treating employees unfairly.
An employee who is leaving employment has to receive the full annual leave entitlement for the period they have worked. For example, a full-time employee who works 37.5 hours per week 7.5 hours per day, Monday to Friday, resigns half way through the leave year.
The employee’s statutory annual leave entitlement for the year-to-date would be calculated as follows:
37.5 hour week x 26 weeks worked in the leave year = 975 hours worked to date
975 hours worked x 8 per cent = 78 hours of annual leave accrued for year-to-date
78 ÷ 7.5 hour days = 10.4 days of annual leave accrued
employee’s annual leave entitlement for the year-to-date is 10.4 days.
If the employee has only taken 6 days annual leave in the year-to-date, then they have to receive pay equivalent to the remaining 4.4 days leave.
Where an employee has taken more than their entitlement, eg taken 14 days and their entitlement is only 10.4 days, then they owe the company the equivalent of 3.6 days of leave. However, the company is only allowed to reclaim this if they have previously informed the employee that they have to right to do so in the contract of employment/annual leave policy e.g. “When an employee is leaving the company, and the paid holidays taken exceed the paid holiday entitlement at the date of termination, the company will deduct the excess holiday pay from their final wage.” Otherwise the company must get permission from the employee to make the deduction.
The employee’s annual leave entitlement, and any days for which they were paid or had deducted on leaving, must be fully documented to avoid any future dispute.
When an employee leaves employment, and they have an entitlement to a Public Holiday benefit as per the Organisation of Working Time Act, 1997, the employee is entitled to receive payment from the employer for any Public Holiday occurring within the next 7 days after termination eg an employee finishes on a Friday and St Patrick’s Day falls the following Thursday.
The area of Employment Regulation Orders (EROs) and Registered Employment Agreements (REAs) has been quite contentious in Ireland in the last number of years with both being rendered unconstitutional in July 2011 and May 2013 respectively. Importantly, it was only those EROs and REAs that were drafted in accordance with the Industrial Relations Act 1946 that were rendered unconstitutional which means that any ERO introduced under the recent Industrial Relations (Amendment) Act, 2012 in respect of any particular industry will be valid and will bind all employers within those industries.
The EROs for both the Security and Contract Cleaning Industries came in to effect on 1st October 2015.
Security Industry: Annual leave entitlements remain unchanged and are as per the previous Security Industry ERO. It provides for levels of annual leave equivalent to the statutory minimum and are based on employees who work at least 1,365 hours per annum. Part time employees' annual leave entitlement is calculated on a pro rata basis. Thus, the proposed ERO is not requiring the employer to afford additional leave entitlements to employees than they otherwise would have attracted under the Act if there were no ERO in place.
Changes have been made to the public holiday entitlement under the new Security Industry ERO. The proposed ERO does not require the employer to afford additional leave entitlements to employees other than those leave entitlements the employees would have been entitled to under the Act if no ERO was in place.
Contract Cleaning Industry: Annual leave entitlements remain unchanged in terms of normal leave accrual and are as per the Contract Cleaning Industry ERO. It provides for levels of annual leave equivalent to the statutory minimum and are based on employees who work at least 1,365 hours per annum. Part time employee’s annual leave entitlement is calculated on a pro rata basis. Thus, the proposed ERO is not requiring the employer to afford additional leave entitlements to employees than they otherwise would have attracted under the Organisation of Working Time Act if there were no ERO in place. There has been changes in respect of Good Friday however. The proposed ERO does not require the employer to afford additional leave entitlements to employees other than those leave entitlements the employees would have been entitled to under the Act if no ERO was in place.
Since 1st October 2015, employees are entitled to public holiday terms in respect of Good Friday provided:
they were employed prior to 2 August 2012, and/or
they are entitled to such a rate in their contract of employment. However, for all other employees Good Friday will just be deemed a normal working day. In respect of public holidays, under the previous Contract Cleaning Industry ERO, employees were entitled to public holidays in line with the Act “exclusive of any qualifying number of hours required in that Act”. This latter sentence has been removed from the new ERO which now means, for example, that part time employees will be required to have worked 40 hours in the previous 5 weeks in order for public holiday rates to be applicable.
Employers are legally obliged to maintain comprehensive records for each employee that contain:
the name, address, PPS Number of the employee and a brief statement of the employee’s duties. Reference to the employee’s job description or job classification is acceptable, for example Grade 2 Officer or HR Manager
a copy of the employee’s contract of employment or offer letter which complies with the requirements of the Terms of Employment (Information) Act, 1994
records of the days and total hours worked each week by the employee. Records of any days and hours of leave taken (annual or public holidays), and payment made in respect of them to the employee in any given week
records of any additional days’ pay made to the employee in respect of public holidays, in the event that the employee was required to work on a public holiday occurring in any given week. If applicable, these records should be accompanied by copies of the 14 day notification to work letter provided by the employer to the employee and any notices that were posted conspicuously in the employer’s employment of the requirement for the employee to work on the public holidays
a copy of the notification provided to the employee by the employer, at least 24 hours before the first day, of the start and finish times on each day, or as the case may be, the day or days concerned, to be worked in each week by the employee. This requirement applies if neither the employee’s contract of employment or offer letter specify the normal start and finish times of work.
Where an employer does not use a clocking in system to record each employee’s daily and weekly working hours, the employer must use a form which meets the Minister’s requirements. Should an employer introduce a working time form, with both parties’ agreement, the employee may complete it on a daily or weekly basis.
Maribel Dominguez v Centre Informatique du Centre Ouest Atlantique - Holiday entitlement: conditions
Court of Justice of the European Union - September 2011
Placing conditions on right to statutory annual leave not permitted
Dominguez was involved in an accident on her way to work in France on 3 November 2005. As a result of her injuries she was then absent from work until 7 January 2007.
French national law contains a provision that makes the entitlement to annual leave dependent on an employee having worked at least 10 days in the relevant reference period. In practice, this means that employees must have worked for at least 10 days in the holiday year. As Dominguez had not worked at all during 2006 the employer argued that she had no entitlement to holiday leave.
The Court of Justice of the European Union ruled that this French law was not compatible with the working time directive. All employees have an entitlement to a minimum of four weeks' leave per annum (the UK gives a greater entitlement than that set out in the directive, namely 5.6 weeks). This is an entitlement and cannot be subject to any provisos.
The French national law does have an exception that holiday entitlement is paid if the absence is related to a work accident. Dominiguez argued that an accident on the way to work is a work related absence. The Court of Justice ruled that this matter was for the French courts to decide.
Some employers have requirements that employees have to meet before they are entitled to annual leave. This ruling clearly states that employers may not impose conditions or restrictions on their employees’ entitlements to statutory annual leave. From an Irish employment law perspective, it is important for employers to note that there is no statutory qualifying period for annual leave rights to be activated. All employees regardless of status or service qualify for paid annual leave. Employers are not permitted to contract out of statutory employment rights.
Zentralbetriebsrat der Landeskrankenhauser Tirols v Land Tirol - Holiday entitlement: parental leave
European Court of Justice - April 2010
Entitlement to annual leave for parental leave and on moving to part-time work
The Court of Justice of the European Union was asked to consider the following points. Like all CJEU rulings, this one applies to Ireland.
Workers who moved from full- to part-time work had their accumulated holiday reduced in accordance with their new hours. So, if an employee had already accrued a number of days' holiday as a full-time worker, that amount of holiday was reduced by a pro-rata percentage equivalent to the reduction in hours as a part-time employee.
The ECJ ruled that this was not permitted under the working time directive. Holiday which had been accumulated could not be reduced retrospectively.
Employees who took the two years' parental leave allowed for in Austria, forfeited their right to any paid annual leave that had accumulated in the year preceding the birth of their child. This was ruled to be unlawful. Employees who are taking parental leave continue to accrue holiday in the same way that employees who are taking maternity leave continue to accrue holiday.
This case further reinforces earlier CJEU decisions relating to holiday entitlements (for example Pereda v Madrid Movilidad [2009] and Stringer v HMRC [2009]).
Employees continue to accrue their 4 weeks statutory annual leave whilst on parental leave. The accrual of any additional leave over the statutory allowance will depend on the terms of the contract of employment.
Neidel v Stadt Frankfurt am Main - Holiday leave: carry over
Court of Justice of the European Union - May 2012
Employer must permit carry-over of four weeks of untaken leave
Neidel worked as a fire officer in Germany. He started a period of absence in June 2007 due to being unfit for service on medical grounds, and then retired at the end of August 2009.
While employed, he was entitled to 26 days’ annual leave and was also entitled to compensatory leave for public holidays. German law is such that he was normally required to take the leave during the current leave year, but could carry forward leave for a period of up to nine months. If the leave was not taken by the end of that nine-month period, then it was forfeited without any compensatory payment.
Neidel brought a claim for payment for 86 days of annual leave that he had accumulated but not taken.
The case was referred to the Court of Justice of the European Union (CJEU) to determine whether the entitlement to an allowance in lieu of holiday applies only to the four weeks' leave set out in the working time directive or to any additional period of leave that is allowed for in national law as well.
The CJEU ruled that, when employment is terminated, the working time directive requires a payment to be made to the worker in lieu of untaken annual leave . So Neidel was entitled to a payment in lieu of the four weeks' leave set out in the directive which he had not taken.
The CJEU then considered the situation where national law allows leave in addition to the four weeks set out in the directive. The court decided that employees are not entitled to a payment in lieu of any additional leave that has not been taken.
In Ireland, national law allows for 4 weeks paid leave per annum. Where an employee has been unable to take any of his/her statutory annual leave due to sickness absence, the employer must permit the employee to carry forward four weeks of the leave over for a period of 15 months from the end of the leave year it accrued in – but is not obliged to permit the employee to carry forward any leave that is additional to the four weeks (unless the employee’s contract allows for such carry-over).
Asociación Nacional de Grandes Empresas de Distribución (ANGED) v Federación de Asociaciones Sindicales - Holiday leave and sickness
Court of Justice of the European Union - June 2012
Is a temporarily disabled employee allowed to take annual leave at a later date?
This ruling relates to a Spanish collective agreement affecting department store workers. The Spanish law allowed for a female worker to take annual leave at a later date if she was ill as a result of pregnancy, labour or breastfeeding, but did not address the situation in which annual leave clashed with a period of sick leave relating to a temporary disability.
The CJEU ruled that a worker in this situation must be allowed to take the annual leave at a later date. The purpose of sick leave is different to the purpose of annual leave, and they cannot be taken at the same time. The time at which the worker becomes unwell is not relevant.
Since the Pereda ruling, it has been clear that a worker who becomes ill or is injured just before or during annual leave must be allowed to take the remaining annual leave at a later date.
s19(2) of the Organisation of Working Time Act 1997 states a day booked as holiday will not be regarded as a day of annual leave under the Act where the employee is ill on that day and provides their employer with certification of their illness from a registered medical practitioner. In these circumstances, the employer will need to ensure they are accurately recording the leave to avoid classifying the time as annual leave when it should be categorised as sickness.
KHS AG v Schulte - Holiday leave: carry over and sickness
Court of Justice of the European Union - November 2011
The right to carry forward holiday following sickness absence is not unlimited
As set out in Stringer v HMRC [2009], employees continue to accrue statutory holiday entitlement when they are on sick leave. In this case, the German courts asked for a ruling on how long accrued holiday entitlement can be carried forward. There is a German national law which states that workers lose their right to holiday (and pay in lieu of holiday) after a carry forward period of 15 months.
The Court of Justice of the European Union (CJEU) ruled that this law is compatible with Article 7 of the working time directive). The court concluded that there is a point at which a holiday ceases to become a rest from work and becomes merely a 'period of relaxation and leisure'. If the holiday is mere relaxation and leisure and is not providing a worker with a rest from work, then it is not consistent with what is required by the directive. Applying this to the German law, allowing workers to carry forward holiday entitlement for 15 months after the holiday year has ended is sufficient.
The Organisation of Working Time Act 1997 provides a statutory minimum of four weeks' paid annual leave for workers. The Act states workers accrue annual leave bases on the amount of time worked but was silent on how sick leave should be taken in to account.
The legislation has now been updated to reflect the CJEU's decisions on accrual of holiday leave whilst sick. s86(1) of the Workplace Relations Act (2015) commencement Order 2015 took effect from 1 August 2015. This section confirms statutory annual leave entitlement continues to accrue during periods of certified sickness absence and a carry over period of 15 months will apply for annual leave which could not be taken during the relevant leave year due to illness.
Pereda v Madrid Movilidad - Holiday leave: conversion of sick leave
Court of Justice of the European Union - September 2009
Employee entitled to convert a period of sick leave to holiday leave
Pereda was injured just before his period of annual leave was about to commence. He asked his employer to be allowed to reschedule his annual leave - this request was refused. Pereda’s claim was ultimately referred to the European court.
The question before the CJEU was whether an employee who falls sick or is injured just before a period of planned annual leave is entitled to reschedule the leave at another time when he/she has recovered. The argument put to the court was that the purpose of the annual holiday entitlement set out in the working time directive is to allow employees to rest and relax, while sickness absence is for the purpose of recovering from illness or injury.
The CJEU upheld these arguments. If an employee is ill during a period of time that has been booked as holiday, the employee has the right to be granted a request for that period of holiday to be rescheduled. If it is not possible to reschedule the period of holiday during the current holiday year, it can be carried forward to the next holiday year.
The CJEU did not make any ruling on whether employees must produce medical evidence to confirm their sickness. Under s19(2) of the Organisation of Working Time Act 1997 a day booked as holiday will not be regarded as a day of annual leave under the Act where the employee is ill on that day and provides their employer with certification of their illness from a registered medical practitioner.
In these circumstances, the employer will need to ensure they are accurately recording the leave to avoid classifying the time as annual leave when it should be categorised as sickness.
Stringer v HMRC - Holiday leave accrual and sickness (ECJ)
European Court of Justice - 2009
Statutory annual leave accrues during all periods of sickness absence
The case was joined with a reference from the German Labour Court (Schultz-Hoff v Deutsche Rentenversicherung Bund). The key issue at stake was whether workers on long-term sick leave could continue to accrue paid annual leave.
The CJEU ruled that the basic four weeks of statutory annual leave required by the working time directive continues to accrue during all periods of sickness absence, whatever their length. The court also ruled that a worker is entitled to take any leave lost due to sickness absence at another time or, if employment is terminated, to be paid for it in lieu.
Having decided the claimants continued to accrue annual leave during their periods of sickness absence, the court went on to rule when the leave could be taken. The directive is clear that member states have the choice:
to allow employees to use their annual leave during a period of sickness absence (in other words, convert a period of sick leave into holiday leave for which they would be paid in full)
or to allow them to carry the unused holiday over to the next holiday year in circumstances where they had not had the opportunity to take their holidays during the relevant leave year.
The CJEU ruled that workers on sick leave at the end of the leave year were in a unique position - they had effectively been denied the opportunity to take their holidays. For that reason, any worker who has been on sick leave for the whole of the holiday year must not be prevented by national law from carrying forward their unused holidays to the next holiday year or beyond, if necessary.
It is also clear from the decision that any worker returning from a spell of sick leave who has the opportunity of taking their annual holidays before the end of the current leave year, but who fails to do so, need not be permitted to carry over their entitlement into the following holiday year. In these circumstances, the worker would simply lose the holiday. Finally, the CJEU ruled that any worker who has been unable to take their holiday leave due to sickness absence lasting for the whole or part of the holiday year (and any carry-forward period) must receive payment in-lieu of the untaken holiday if their employment terminates.
Although the directive does not provide for a method to calculate this payment, it is clear that the pay in lieu of holidays should be based on the worker’s normal remuneration in order to place the worker in the same position as he or she would have been in if he/she had taken the leave.
Williams v British Airways plc - Calculation of holiday pay: allowances
Court of Justice of the European Union - June 2011
Holiday pay must include allowances
British Airways pilots and cabin crew complained that the calculation of their pay when they were taking annual leave was based on their basic salary only, rather than on the total payment that they could expect to receive if they were actually at work and flying (when various allowances are paid). They argued that this was a breach of the rules set out in the working time directive relating to the calculation of holiday payments.
The Supreme Court referred this case to the Court of Justice for their interpretation of the relevant legislation. The court ruled that payments which relate to 'normal remuneration' must be included in the calculation of holiday pay. Such payments must include any allowances that are ‘intrinsically linked’ to performance of the employees’ jobs. Consequently, the flying supplements which related to work that the pilots were contractually required to carry out had to be included within the calculation. Furthermore, the CJEU ruled that any payments related to employees’ professional and personal status (for example, seniority payments) must be included in holiday pay. However, payments which related to out-of-pocket expenses (for example, payments for time away from a base) need not be included.
The European Court of Justice has said that national courts are responsible for identifying which parts of remuneration constitute 'normal remuneration' and which parts relate to expenses. The case was referred back to the Supreme Court for them to rule on each element of the pilots' pay.
Note that this case returned to the Supreme Court in 2012, which clarified that the pilots were entitled to their normal remuneration during the four week period of statutory UK leave. The court said the pay must include all elements of remuneration, such as flying pay supplements, and only sums intended exclusively to cover expenses could be excluded.
The Court of Justice gave clear guidance in this case indicating that when calculating holiday pay, any elements of pay linked to performance of the employees’ jobs or their professional or personal status must be included, but elements that relate to out-of-pocket expenses need not be.