News & Insights: Commercial

Calculating Holiday Pay – Recent NI Tribunal Decision, Alexander Agnew and Others .v. Chief Constable of Northern Ireland & Others [2018]

4 December 2018

In November 2014, the Employment Appeal Tribunal (EAT) issued the Bear Scotland LTD v Fulton decision in which it was held that all regular overtime payments should be included in the calculation of statutory holiday pay. The decision applied only to holiday pay in respect of the EU Working Time Directive (20 days) and did not relate to the additional 8 days leave under the Working Time Regulations. Additionally it was held that a gap of more than three months between non-payments or underpayments of wages would break the ‘series’ of deductions for the purpose of bringing an unlawful deduction from wages claim.

A recent Northern Irish Tribunal decision has however rejected the EAT authority of Bear Scotland.

The Tribunal held the PSNI and the Police Authority for Northern Ireland liable for not including overtime payments and allowances in their calculation of the Claimants’ holiday pay. It is estimated that the decision will result in a required back payment of £30 million in respect of unlawful deductions over a 20 year period.

The claimants included police constables and sergeants in the PSNI as well as civilian employees of the Police Authority.

In reaching its decision, the Tribunal made the following findings: –

  1. A series of deductions will not automatically be broken by a three month gap. Where a break has occurred on grounds of illness, family leave or annual leave, this will not necessarily break the chain of back payments.
  2. An occasional correct payment in a series of payment may not breach the chain of back payments.
  3. Employees are entitled to 20 days under the EU WTD, 8 days under the WTR plus any further contractual annual leave entitlement. The general position was that annual leave was taken in succession with the 20 EU WTD days taken first, followed by the 8 WTR days and finally any additional contractual entitlement. This was found to be incorrect. The Tribunal found that each day of annual leave is a fraction of the whole entitlement; that is a fraction of WTD leave, a fraction of WTR leave and a fraction of any contractual leave thereby creating a situation where every day of annual leave attracts WTD rights.
  4. The reference period for each individual varies. Where a worker works regular overtime, an appropriate reference period may be 12 weeks. However, for workers whose overtime peaks during a particular period, for example during July and August, an appropriate representative reference period is likely to be 12 months.
  5. The Tribunal confirmed that regular voluntary overtime payments should be factored into the calculation of holiday pay (Dudley Metropolitan Borough Council .v. Willetts and Others).

It is likely that the Tribunal’s decision will be appealed to the Northern Ireland Court of Appeal.

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