The regulations provide for the right to four weeks’ paid leave from 23 November 1999 for all “workers”. That includes both employees and those who perform work “personally”.
But the drafting presents a problem to companies that engage workers whose hours or pay fluctuate, perhaps seasonally, as work demand dictates. These workers are entitled to remuneration for holiday periods at the rate arrived at when their earnings in the 12 weeks preceding the holiday are averaged.
Regulation 16(2) states that section 221 to 224 of the Employment Rights Act 1996 shall apply in calculating the amount of a “week’s pay” for these purposes. Enhanced voluntary overtime is not included, but commission payments, wages, bonus entitlements and any other payments that can be said to be “remuneration” payable “for, or apportionable to, the hours the employee was working”, are.
The implications may be significant. Where a worker has been working extremely hard on the completion of a contract over a number of weeks and as a result has received a high contractual productivity bonus, if that worker then goes on holiday, his holiday pay will be substantially higher than if he took time off at a different period. Employers can find themselves saddled with extra costs as well as with the administrative burden of calculating holiday pay each time the worker goes away. Employers may also be faced with a large proportion of workers wanting to take time off immediately after surges in work.
Employers who find themselves in this position would be well advised to consider exercising their right under Regulation 15(2) to serve notice on the relevant workers not to take leave over particular periods (but note, such notice must be in the appropriate form and be served early enough to comply with Regulation 15(3) and (4)).
- All workers will be entitled to four weeks’ paid leave
- Workers could take all four at the start of a year
- Workers whose pay fluctuates get holiday pay based on past 12 weeks
A further problem faced by employers is the question of when workers have the right to take four weeks’ paid holiday. This right does not arise until the worker has been continuously engaged for 13 weeks. In the case of Wellicome vs Kelly Services (UK) Ltd,1 the tribunal at first instance held that where a worker has accumulated 13 weeks’ continuous service, he or she has the right to take paid leave from the first day of the holiday year. The tribunal also held that any contract term that allows the worker only leave that has accrued on a pro rata basis is void.
As such, employers could be faced with workers taking all their paid leave at the beginning of the year. Employers should again think carefully about exercising their right under Regulation 15(2).
The real problem arises if a worker takes his paid holiday at the beginning of the year and then disappears, having been paid already. Regulation 14(4) allows an employer to claw back this overpayment, but he can do so only if a “relevant agreement” allows him to do so and if he can find the worker. Although employers should check that their contracts allow them to claw back such overpayments, recovering the money presents obvious problems.
But there is some good news for employers. Although there are no proposals to amend the paid leave provisions, the government has published a draft amendment that works in two ways: first, by removing the need to keep records of the hours worked by those who have opted out of the 48-hour week; second, by extending the scope of the “unmeasured working time” exemption insofar as only those hours that are measured or predetermined will count for the purposes of the regulations. To some extent, this will lighten the employer’s burden.
1 9.2.99, case no 1804934/98
Postscript
Edward Goodwyn is a solicitor specialising in employment law at Masons. He can be contacted on 0171-490 4000; or e-mailed at edward.goodwyn@masons.com.
