CCPS
Holiday pay and sleepovers
December 2014
Holiday pay
Donald Mackinnon, Director of Legal Services
A better way to manage your employment,
human resources and health & safety risks.
Plan of action
1. Components of annual leave
2. General principles regarding traditional
calculation of holiday pay
3. Summary of recent cases on holiday
pay
4. Up to date position regarding payment
of holiday pay going forward
5. Tackling potential historic liability
6. Other issues
A better way to manage your employment,
human resources and health & safety risks.
Components of annual leave
Directive
UK law
4 weeks 5.6
weeks
Contract
???
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human resources and health & safety risks.
General principles regarding traditional
calculation of holiday pay
Normal working
hours
No normal working
hours
Amount payable
under contract of
employment
Average pay over
previous 12 weeks
A better way to manage your employment,
human resources and health & safety risks.
Holiday pay case law
British Airways v Williams
• Pilots’ supplementary payments?
Lock v British Gas
• Commission?
Wood and others v Hertel (UK) Ltd and
Another; Fulton & Another v Bear
Scotland
• Regular overtime?
A better way to manage your employment,
human resources and health & safety risks.
Up to date position regarding payment
of holiday pay going forward
Question: What types of employee are likely to be
affected?
Answer: Those who earn additional sums that are
“intrinsically linked” to their job, including those who:
• Earn regular commission
• Work regular paid overtime
• Receive regular allowances
• Whose actual hours of work are more than those
stated in their contract of employment
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Question: To what holidays do the new
principles apply?
Answer: Only to the 4 weeks under the Working
Time Directive
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human resources and health & safety risks.
Grey areas…
How regular/frequent
do the payments have
to be?
If payments fluctuate,
over what period
should they be
averaged?
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human resources and health & safety risks.
What should employers do now?
Carry out an assessment to see if
their employees are affected
If answer is “yes” consider
changing holiday pay practices
going forward (from now, 1 January
or start of next holiday year?)
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human resources and health & safety risks.
Tackling potential historic liability
Key findings from Wood and others v Hertel (UK)
Ltd and Another; Fulton & Another v Bear
Scotland:
• Claims must be raised within 3 months of
underpayment
• If gap of 3 months or more between 2
underpayments “chain is broken” and claim in
respect of earlier underpayment is time-barred
• First 4 weeks leave in each leave year are
deemed to be WTD holidays
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Are the cases likely to be appealed?
Finding in relation to Unlikely to change
position going forward
Finding in relation to More
likely
historic liability
overturned
to
be
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human resources and health & safety risks.
Other issues
Approach to
communication with
trade
unions/employees
Do Local Authorities
have any
responsibility for your
liability?
What is position in
respect of employees
who TUPE’d into your
organisation
Questions and discussion
Sleepovers
Gerry O’Hare, Senior Legal Manager
A better way to manage your employment,
human resources and health & safety risks.
Plan of action
1. Summary of relevant principles in
relation to NMW
2. Determining compliance with NMW
3. Case law on treatment of sleepovers
for NWM purposes
4. Ensuring compliance going forward
5. Tackling potential historic liability
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human resources and health & safety risks.
Summary of relevant principles in relation
to NMW
• Specified minimum hourly rate to
which most workers are entitled
• Different rates for different
categories of worker
• All employers obliged to pay
NMW irrespective of size
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Determining compliance with NMW
Whether worker has received NMW will depend on
their average hourly rate
Total remuneration
earned in relevant
pay reference period
Steps 1
&2
Total number of hours
worked in relevant
pay reference period
Steps 3
&4
A better way to manage your employment,
human resources and health & safety risks.
Step 1 – identify pay reference period
Pay reference period – one month or
shorter if employee is paid more frequently
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Step 2 – calculate remuneration
Total remuneration – gross pay before deductions for
income tax and NI less payments and deductions that reduce
the NMW.
Includes:
Doesn’t include, e.g.:
• Basic salary
• Expenses
• Bonus, commission & other • Loan by employer
incentive payments
• Redundancy payment
• Piecework payments
• Tips & gratuities paid
• Accommodation allowance through payroll
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Step 3 – calculate hours worked
Number of hours worked is calculated differently
depending on type of work done by worker
Time
work
Salaried
hours
work
Output
work
Unmeasured
work
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human resources and health & safety risks.
Step 4 – understand what is “working time”
Consists of time that the worker is:
• Actually working
• Available at or near a place of work for the
purposes of doing time work and required to be
available for such work
• Travelling on business during normal working hours
• Attending training during normal working hours,
either at work or elsewhere
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“Available at or near a place of work…”
….for the purpose of doing time work and required to be
available for such work, subject to certain exceptions
including the following:
“In relation to a worker who sleeps by arrangement at or
near a place of work and is provided with suitable
facilities for sleeping, time during the hours they are
permitted to use those facilities for the purposes of
sleeping shall only be treated as being time work when
the worker is awake for the purpose of working”
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human resources and health & safety risks.
How are sleepovers treated for NMW
purposes?
Are sleepovers time spent “actually working”
or time spent “available at or near a place of
work for the purpose of doing time work and
required to be available for such work”?
A better way to manage your employment,
human resources and health & safety risks.
Sleepover case law
• Whittlestone v BJP Home Support Ltd
• Esparon t/a Middle West Residential Care
Home v Slavikovska
• South Manchester Abbeyfield Society Ltd v
Hopkins & Another
• City of Edinburgh v Lauder & Others
A better way to manage your employment,
human resources and health & safety risks.
Potential consequences of failure to
comply with NMW
•
•
•
•
•
NMW is enforced by HMRC
Civil enforcement – notice of underpayment
Criminal enforcement
Name and shame
Enforcement by worker by way of unlawful
deduction of wages claim or breach of
contract claim
• Could a finding of this nature jeopardise
winning future public sector contracts?
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human resources and health & safety risks.
Ensuring compliance going forward
• First, ask yourself whether sleepovers are
absolutely necessary?
• Could care workers be on-call from their homes
as opposed to at place of work?
• Could you have waking night shift workers
located centrally who respond to emergencies at
different locations (perhaps sharing the cost
with other service providers)?
• Any changes to this effect will no doubt involve renegotiation with client
A better way to manage your employment,
human resources and health & safety risks.
If sleepovers are absolutely necessary,
consider…
• Adjusting rates of pay to ensure compliance with NMW
(perhaps accompanied by cost saving measures like a
pay freeze)
• Ensuring mix of “normal shifts” and sleepovers
results in average rate of pay exceeding NMW
• Decreasing length of sleepovers and increasing
length of normal shifts to increase average hourly rate
of pay
• Complete re-negotiation of terms and conditions
• Seeking to re-negotiate payment terms with client
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human resources and health & safety risks.
Tackling potential historic liability
Pay out in
respect of
underpayments
Sit tight and see
whether any
action is taken
against you
Questions and discussion