Nikki Duncan
Posted on 5 Mar 2015

Food & Drink sector - holiday pay ruling: how much?!

Food and Drink sector employers may well be nervously considering the costs implications of the recent test cases on holiday pay calculations.

It is now clear that the EU require the EU-wide four weeks statutory minimum holiday pay to be based on all "normal" remuneration.  That means including overtime, whether or not guaranteed, sales commission or any other elements of pay which relate to time worked. The reason is that four weeks fully paid leave is viewed as a minimum, and a fundamental EU social law, designed to protect health and safety workers.  The European Court has therefore expressed concern that workers may be disincentivised from taking even this minimum holiday if that impacts their pay (e.g. because they lose overtime, sales commission, etc).

More worryingly, there has been considerable concern about the scope for claims going back to 1998, or any later worker start dates. Here the latest Employment Appeal Tribunal decision has been more helpful, in that it has said that any break of three months between periods of holiday will break continuity.  It therefore rests with workers to bring evidence to support claims of the dates of holiday taken and details of the exact amount they claim to have been underpaid. The problem for the employer is likely to be lack of historic holiday records, to challenge such claims.  

The other remaining uncertainty is the reference period over which irregular overtime, commission etc. should be averaged, to work out the correct holiday pay arrears.  The European Court has left that to Member States to determine, but doubtless that will be something high on the list of the Government Taskforce which has just been established to assess the impact of these legal changes. 

The Taskforce appears to be made up of representatives of seven employer organisations, who doubtless will be lobbying hard for the Government to cut back these rights.  That said, since it is based on an EU health and safety provision, apart from sorting out areas of uncertainty, there is little that the Government will be able to do, short of leaving the EU!