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Employment E Bulletin - January 2015

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Holiday Pay

There have been a number of changes to the holiday pay regime recently following the cases of Williams, Lock and Bear Scotland. This article addresses some of the changes. For a more comprehensive review of the position see our article here.

What should now be included in holiday pay under the Working Time Directive?

Following the EAT’s decision in Bear Scotland, statutory holiday pay derived from the Working Time Directive must be calculated in accordance with the tests laid down in the ECJ case law, whereby holiday pay is based on pay that is normally received and must include:

  • Payments linked intrinsically to the performance of the tasks which the worker is required to carry out under their contract of employment.

  • Payments which relate to the worker’s professional and personal status.

Below is a table showing some types of pay and whether they should be included when calculating holiday pay.


Type of pay


Should it be included?


Anything Else?






The ECJ in Lock ruled that commission must be included as it was intrinsically linked to the performance of tasks under the workers contract. It must be based on average commission earned “over a reference period which is considered to be representative”

Guaranteed (Compulsory) overtime




Guaranteed (compulsory) overtime is covered in “normal working hours” under the ERA 1996 and therefore is to be included in holiday pay in respect of the full 5.6 weeks’ leave.

Non-guaranteed overtime (where the employee is obliged to work overtime if required but the employer is not obliged to provide it)




Following the EAT’s decision in Bear Scotland it is clear that non-guaranteed overtime should be included in leave taken under the working time directive as it is required by the employer and thereby intrinsically linked to a worker’s work

Voluntary Overtime (regular)




This type of overtime was not dealt with specifically by the EAT and so the position is less clear. We consider that voluntary overtime should be included in holiday pay where a settled pattern of overtime has developed. It is likely that cases on the inclusion of voluntary overtime will follow.

Voluntary Overtime (irregular)




Where overtime is both voluntary and ad-hoc it is unlikely to form a settled pattern and accordingly we consider that it does not need to be included in the calculation of holiday pay.





Payments which are “intended exclusively to cover occasional or ancillary costs” arising at the time the worker performs the tasks required by the contract are excluded from holiday pay under the Working Time Directive.

Productivity, attendance or performance bonuses




The test is whether the payment is “intrinsically linked” to performance of tasks by the worker under their contract, not whether it is “exclusively” so. Therefore a bonus that depends on team, rather than individual, performance is potentially within scope.

Annual discretionary (and other) bonuses?




Bonuses are one of the biggest grey areas and are likely to give rise to future litigation.


How far back can employees claim?

Before the EAT delivered its judgment in Bear Scotland, employers were faced with the possibility of back pay claims for underpaid holiday stretching back many years.

However, the judgment in Bear Scotland effectively limited the ability of employees to claim for underpayments. This is because it established that employees could not claim for underpaid holiday pay where more than three months had elapsed between deductions.

In addition the Government has now introduced the Deduction from Wages (Limitation) Regulations 2014. They do two things:

  1. limit all unlawful deductions claims to two years before the date the Claim is lodged; and

  2. explicitly state that the right to paid holiday is not incorporated as a term in employment contracts

This has the effect of removing any chance employees have of bringing long-term claims for back holiday pay. The new regulations don’t apply to Claims presented to an Employment Tribunal before 1st July 2015 so we may see longterm back-pay claims being submitted quickly to avoid the effect of the new regulations.

Whilst introduced in the wake of the holiday pay issues the regulations do in fact apply to all claims for unlawful deduction from wages with limited exceptions.


Obesity can be a disability

 In July 2014 we sent out an update on the case ofFOA, acting on behalf of Karsten Kaltoft v Kommunernes Landsforening, acting on behalf of the Municipality of Billund. You can read that bulletin here.

In an update to that matter, the ECJ has agreed with Advocate General Jääskinen that there is no general principle of EU law prohibiting discrimination on grounds of obesity.

However, obesity may fall within the definition of disability under the Equal Treatment Framework Directive. It will if it entails a limitation resulting, in particular, from long-term physical, mental or psychological impairments which, in interaction with various barriers, hinder a worker's full and effective participation in their professional life on an equal basis with other workers. Unlike the Advocate General, the ECJ did not suggest that only severe obesity might fall within the definition of disability. Each case will depend on its facts.

The position therefore remains as held by the EAT in Walker v Sita Information Networking Computing Ltd: obesity is not an impairment of itself but the effects of obesity may result in a claimant being disabled.


Shared Parental Leave 

The Shared Parental Leave Regulations are now in force and apply to eligible parents of babies due on or after 5 April 2015.

The regulations give parents the right to take Shared Parental Leave and place a duty on employers to ensure that their employees are not penalised for using their entitlement or put under pressure to cancel/change a leave notification.

Shared Parental Leave enables parents to share the caring responsibilities evenly or have one parent taking the main caring role, depending on their preferences and circumstances.

You can listen to our podcast on Shared Parental Leave here.

Acas has produced a helpful guidance note entitled “Shared Parental Leave: a good practice guide for employers and employees”. The link to that document is here.

In addition the long awaited online tools promised by BIS have now arrived. Here is a link to them. The tool calculates the entitlement to maternity, paternity and shared parental leave and pay but does not assist with notification etc.


Fit for Work Advice Service

The Fit for Work advice service is now live. The service is provided by Government and is designed to support those in work with health conditions and those who are off sick.

The idea of the Fit for Work service is to provide occupational health type support to both employers and employees. At present the service is limited to online guidance and a telephone and email service. However, a referral service will soon be offered which “will enable you to refer your employees, with their consent, to an occupational health professional. A practical step-by-step Return to Work Plan will be produced, tailored to your employees’ needs, to help them return to work.”

At present it is not known when the referral service will be operational. You can find out more about this service here.


If you require any further advice or assistance in connections with any of these matters, please contact a member of the Employment Team.