UK: Holiday pay – EAT ruling on calculating holiday pay on termination of employment
Authors:
- Robert Hill – robert.hill@clydeco.com
- Sophie Jackson – sophie.jackson@clydeco.com
Mr Connor was employed by Chief Constable of the South Yorkshire Police between 1 November 2002 and 29 May 2020, when he was dismissed following a long period of ill-health absence. It was agreed that he was entitled to be paid in lieu of holiday accrued but not taken at the end of his employment, but there was a dispute about how it should be calculated.
Mr Connor’s employment contract said payment for accrued holiday at the end of his employment would be ‘…based on 1/365th of annual salary for each day’s leave. Any payment will be subject to the usual statutory reductions.’ Calculating the payment according to this formula meant Mr Connor received less than he would have been paid had he taken the holiday. He brought a claim for unlawful deduction from wages.
The EAT decided that any formula under an agreement must be in keeping with the rights provided under the WTR. This means the payment in lieu of untaken annual leave must be no less than the statutory amount owing in respect of both the four weeks’ leave required by EU law and the additional 1.6 weeks’ leave provided for by UK law.
Key Action Points for Human Resources and In-house Counsel
Employers should review their employment and worker contracts as this case makes clear that any provision which says that only a nominal payment (for example in the case of a bad leaver), or any amount that is less than the Working Time Regulations provide for, will be paid for accrued but untaken leave at the end of employment will not be valid.
It would, however, still be possible to limit any payment for accrued but untaken contractual holiday over and above the statutory holiday entitlement to a nominal amount in the contract.
