DTI consultation on Working Time Regulations

While the European Commission (EC) continues its consultation on changes to the Working Time Directive across Europe (see Newsletters of 28 May 2004 and 9 January 2004), the UK Government has decided to consult on the key issues within the UK. The Department of Trade and Industry published a consultation document on 29 June entitled Working Time - Widening the Debate.

The document throws open the debate on the future of the 48-hour opt-out. The EC's most recent consultation document identified four options for the opt-out:

1. Tighten the conditions of application of the individual opt out in order to strengthen its voluntary nature and raise the level of protection for workers.
   
   
2. Permit exemptions from the maximum weekly working time only through collective agreements between the social partners.
   
   
3. Provide that the opt out would only be possible when authorised by means of collective agreements between social partners. In undertakings without such applicable agreement and no representation of the employees, the individual opt out under tighter conditions would remain applicable.
   
   
4. Revise the individual opt out, with a view to its phasing-out, as soon as possible, and to identify, in the meantime, practical ways of tackling abuses.

The UK Government's position
The Government states clearly that it is in favour of retaining the opt-out because its use

• preserves labour market flexibility which is one of the reasons for the UK's success in job creation, and
  
  
• recognises the wide use of individual contracts of employment in the UK, which place a value on individual choice.

The Government is not in favour of the second and third options, that the opt-out should only be available where workers are protected by collective agreements. Only 35% of workers in the UK are covered by collective agreements and that would mean about two thirds of all workers not having access, or having only limited access, to the opt-out.

The Government supports the related proposal by the EC that the 17-week reference period, over which the 48-hour limit is averaged, should be extended. The use of a 52-week reference period is currently limited only to collective agreements. Extending the reference period to a year would reflect the trend towards annual hours, improve flexibility and reduce the need for businesses to calculate average hours so regularly. However, the Government does not believe that extending the reference period would remove the need for the individual opt-out.

As it is likely that European employers and unions will decline to negotiate the changes proposed in the EC consultation, the EC is expected to make formal proposals for change in September 2004. These will be subject to negotiation and agreement by member states and the European Parliament. The new consultation conducted by the DTI is intended to assist the Government in these negotiations.

A culture of long hours?
The consultation acknowledges that UK workers are traditionally seen as having a culture of working long hours. The Government believes, however, that the full picture is that the UK has a wider range of working patterns than most member states. For example, 22% of workers work flexible hours and 26% work part time hours. Also, since 2000, the number of workers regularly working more than 48 hours per week has fallen from 23.3% of full-time workers in spring 1998 to 20.4% in spring 2003.

Although the Working Time Directive is intended to provide health and safety protection, the Government states that research does not show a causal link between working hours and ill health. There is stronger evidence to show that ill health is caused by job control, monotonous and repetitive work and an imbalance between a worker's effort and reward. The Government suggests therefore that it is wrong to focus simply on working hours to protect health and safety, but to consider a wide range of approaches, as is required of employers under Health and Safety at Work legislation.

Options for the UK
The consultation document gives a long list of measures on which the Government would like to consult. The document stresses that the measures are not proposals, simply the many ideas that have been put forward by the various interested parties. These ideas for consultation are as follows:

• requiring written opt-out agreements to include further information, such as the right of workers to refuse to work long hours, or to change their minds
  
  
• reinforce workers' free choice by introducing legislation that would make it unlawful to include the opt-out in the contract of employment
  
  
• making it unlawful to ask workers to sign an opt-out at the same time as they sign their employment contract
  
  
• setting a time limit for opt-out agreements so that they would have to be periodically renewed
  
  
• setting a higher limit on the hours that may be worked by workers who have signed an opt-out agreement
  
  
• requiring employers to carry out health and safety risk assessments on workers who agree to work long hours
  
  
• extending the night work health assessment arrangements to workers who have signed an opt-out agreement
  
  
• keeping records of hours worked by long hours workers
  
  
• running publicity campaigns to make workers aware of their rights
  
  
• providing good practice guidance that has been prepared with employers and trade unions
  
  
• introduce a code of practice on long working hours, agreed by employers and trade unions

Responding to the consultation
The full consultation document is available at the link below. Responses to the various suggestions, including case studies and statistical evidence, and any comments on any other aspect of the document, are requested from interested parties. Responses must be received by 22 September 2004.

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...back to 2 July 2004

Source:
www.dti.gov.uk/er/work_time_regs/consultation.doc

Working Time consultation

The European Commission (EC) has published a detailed summary of the responses received to the consultation that began at the end of 2003 on a number of the provisions of the Working Time Directive. There are four areas on interest, namely

• the length of the reference period used to calculate the average maximum weekly working time - currently 17 weeks (4 months), but with options to extend it to 26 weeks in certain circumstances, or to a year under the provisions of a collective agreement
  
  
• the option for the maximum 48-hour weekly working time not to apply to workers if they give their individual agreement - commonly known as the "opt-out"
  
  
• the application to the meaning of working time of the judgments of the European Court of Justice (ECJ) in the SIMAP and Jaeger cases
  
  
• measures to improve compatibility between work and family life.

The provisions of the Working Time Directive in the case of points (1) and (2) above were due for review by the EC by 23 November 2003.

The issues raised by the ECJ in the two cases mentioned in point (3) have to do with the meaning of "working time" when workers (doctors in the particular cases) are on call or are sleeping on the employer's premises.

Among the views taken into consideration by the EC was the Resolution of the European Parliament, passed by a large majority on 11 February 2004, that

• called for the revision, with a view to the phasing-out, as soon as possible, of the individual opt-out, and
  
  
• called on the Commission to identify practical ways of tacking potential or actual abuses of the opt-out provision, including seeking views on how best to strengthen the voluntary nature of the opt-out.

Having considered the responses from all interested parties to the consultation issues, the Commission has given its initial views on the four matters in question.

(1) Reference periods
The trend towards greater flexibility in the utilisation of workers, but not at the expense of the health and safety of workers, indicates that the basic 4-month reference period should be extended.

(2) The opt-out
In the existing Directive, the opt-out provisions are accompanied by a number of safeguards that are intended to guarantee freedom of choice for the worker and ensure that the possibility of exceeding the maximum weekly working time is prohibited or restricted. However, "the Commission has certain reservations regarding both the national provisions implementing this Article and its current use in practice."

As a consequence, the Commission believes that it is "necessary to amend the provisions of the Directive with the objective to raise the level of protection for workers compared to the present system, in the light of the experience gained in practice and the criticisms and comments made by interested parties."

The Commission would like to see these objective achieved voluntarily by agreement between both sides of industry. If that cannot be achieved, the proposal is to introduce, by means of amendments to the Directive, one or more of the following approaches:

• tighten the conditions for using the opt-out in order to strengthen its voluntary nature and raise the level of protection for workers. For example,
  
  
  • the separation in time between the individual consent and the signature of the employment contract
    
    
  • an obligation to review regularly the individual consent given by the employee
    
    
  • a cap on the maximum number of hours permitted.
    
    

• permit exemptions from the maximum weekly working time only through collective agreements.
  
  
• provide that derogations from the tighter conditions in (1) would only be possible when authorised by means of collective agreements.
  
  
• as recommended by the European Parliament, revise the individual opt-out with a view to its phasing-out as soon as possible, and identify practical ways of tackling abuses in the meantime.

(3) Definition of working time
The Directive contains two mutually exclusive definitions, that of "working time" and that of "rest period". According to the logic of the Directive, there are no intermediate or combined categories - all periods are considered to be either working time or resting period.

The EC wonders whether it is this "one or other" approach that is at the root of the problems raised by the SIMAP and Jaeger cases and whether a new category should be added that includes characteristics of both the existing categories. In the absence of a voluntary agreement on this matter, the EC will propose the insertion of such a definition into the Directive and clarifications regarding compensatory rest.

(4) Reconciling work and family life
Although the EC recognises that the possibility of workers having a personal say in working conditions, and particularly working time, undeniably contributes not only to a better working environment but also to meeting the needs of workers better, particularly those with family responsibilities, the Directive may not be the right instrument for dealing with the question of compatibility between work and family life in all its aspects. However, it suggests that more could be done to encourage this objective in the text of the Directive.

There will now be a further period of consultation and the EC has asked representatives of employers and workers to comment on these latest proposals.

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...back to 28 May 2004

Source: europa.eu.int/...pdf

Workers providing services "personally"

On 30 May 2003, the Employment Appeal Tribunal (EAT) ruled that a number of bricklayers, including Mr. Wright and Mr. Roberts, were "workers" for the purposes of the Working Time Regulations 1998 (WTR) and were, as a result, entitled to paid holiday leave.

The employer, Redrow Homes, appealed the decision and the Court of Appeal gave its decision on 23 April 2004.

The relevant regulation states:

"Worker" means an individual who has entered into or works under (or, where the employment has ceased, worked under) -

1. a contract of employment; or
   
   
2. any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual."

Mr. Wright and Mr. Roberts were self-employed tradesmen. Nevertheless, the EAT had ruled that they worked under a contract for personal service, i.e.

• they worked under a contract,
• under that contract, they "undertook to do or perform personally any work", and
• Redrow Homes were not a client or customer of their business undertaking.

The grounds for appeal were not that Redrow Homes was a client or customer of the bricklayers. Rather, the employer appealed on the basis that the bricklayers were not required, under the terms of their contract, to perform their services "personally" to the employer. As the contract under which the bricklaying "gangs" worked required that they must "provide sufficient labour" to meet their targets, it was argued that the contract was between Redrow Homes and the subcontractor, i.e. the bricklaying gang, and that there was no requirement for the work to be performed "personally" by particular bricklayers. In effect, the argument was that the individual bricklayers, whoever they might be, worked for the subcontractor, not for Redrow Homes.

H9owever, despite the provisions of the contract, which were intended to cover work performed for Redrow Homes by both small and large subcontractors, the Appeal judges decided that, in practice, "the intention of the parties when the contracts were made involved, in each case, an obligation on the applicants to do the work personally". That Redrow Homes had contracted with the individual bricklayers to perform work personally was supported by the arrangements for payment, whereby each bricklayer was paid individually. The appeal was dismissed.

This finding of the Court of Appeal confirms that contractors taken on to perform project work over an extended period of time may fall into the definition of "workers" and thereby be entitled in full to the provisions of the WTR, including paid holiday leave. Readers interested in considering the read-across from this decision in the case of bricklayers to self-employed contractors working in their own businesses may find useful the following quotation from an earlier EAT decision in the case Byrne Brothers (Formwork) Ltd v Baird and Ors in 2002. This was a closely related case that found that a number of formwork carpenters were "workers" for the same reasons as the EAT gave in the case of Wright and Roberts. The reference to "limb (b)" is to the second part of the Regulation quoted above.

"It seems to us that the best guidance is to be found by considering the policy behind the inclusion of limb (b). That can only have been to extend the benefits of protection to workers who are in the same need of that type of protection as employees (in the strict sense) - workers, that is, who are viewed as liable, whatever their formal employment status, to be required to work excessive hours (or, in the cases of Part II of the Employment Rights Act 1996 or the National Minimum Wage Act 1998, to suffer unlawful deductions from their earnings or to be paid too little). The reason why employees are thought to need such protection is that they are in a subordinate and dependent position vis-à-vis their employers: the purpose of the Regulations is to extend protection to workers who are, substantively and economically, in the same position. Thus the essence of the intended distinction must be between, on the one hand, workers whose degree of dependence is essentially the same as that of employees and, on the other, contractors who have a sufficiently arm's-length and independent position to be treated as being able to look after themselves in the relevant respects."

Source: www.courtservice.gov.uk/...htm
...back to 30 April 2004

Rolled-up Holiday Pay

The story so far…

The Working Time Regulations 1998 (WTR) require employers to provide four weeks' paid holiday leave for their workers. Many staff agencies and employers with casual workers have the practice of including an amount representing holiday pay in their workers' regular wages. This is called "rolled-up holiday pay". No holiday pay is paid when holiday is actually taken.

In Scotland, in the case MPB Structures Limited -v- Munro, the Scottish Employment Appeal Tribunal (EAT) considered the employer's practice of paying an additional 8% on top of Mr. Munro's wages, with instructions for him to ensure that he saves sufficient of his earnings to cover his four weeks' holiday entitlement. The EAT's finding was that "the only way that the provisions of the Regulations and, indeed, their spirit can be met, is for holiday pay to be paid as and when the holiday is taken at the appropriate rate". This decision was later upheld by the Scottish Court of Session in April 2003 on the basis that the European Directive on which the Regulations are based "treats the right to annual leave and to payment for it as part of a single entitlement".

In England and Wales, the position is different. The Employment Appeal Tribunal in London, in July 2003, ruled that the practice of "rolling-up" holiday is lawful and within the provisions of the WTR if the payment of "rolled-up" holiday pay and the actual amount of the payment is expressly agreed and defined in each worker's contract of employment. As there is a risk that workers do not take holiday if they are not paid their full holiday pay at the time, the EAT also stated that employers should take reasonably practicable steps to require workers to take their holidays before the expiry of the relevant holiday year.

This contradictory state of affairs has now been referred to the European Court of Justice by an Employment Tribunal sitting in Leeds. The case in question, Robinson-Steel -v- R F Retail Services Ltd, involves a shop fitter who worked for the employer between April 2002 and December 2003. He worked at different retail outlets around the country and the nature of his work involved day and night shift work. He was paid weekly and his pay included a percentage of "rolled-up" holiday pay. As set out in his terms of engagement, "payment in respect of the entitlement to paid leave shall be made together with and in addition to the Temporary Worker's hourly rate at 8.33% of his hourly rate". During the period of employment, he took only two days' leave at his own request. His complaint to the Tribunal was that he had not taken any more holiday leave because it would not have been paid for at the time he would have taken it.

The Tribunal decided that is was required to address three situations:

1. that the employer, by paying rolled-up holiday pay, has refused to permit the applicant to exercise the right to annual leave,
   
   
2. that the employer, by not paying holiday pay at the time leave was taken, has failed to pay holiday pay for the period of leave taken,
   
   
3. that, if the payment of rolled-up holiday pay is unlawful, any compensation awarded by the Tribunal could not take into account the amount of rolled-up holiday pay that had already been paid during the period of the employment.

The effect of the Tribunal's deliberations would be that, if it were to decide that the employer was in breach of the WTR, no credit could be given for the rolled-up holiday pay already paid and the employer would end up paying twice for the holiday leave.

The Employment Tribunal is bound by precedents set by earlier decisions of Employment Appeal Tribunals. It did not believe that it was bound by a judgement of the Scottish Court of Session. Faced by contradictory decisions of the Scottish and English EATs, the Tribunal decided that it preferred the interpretation of the WTR made by the Scottish EAT in the Munro case.

In order to settle the issue, the Employment Tribunal decided to adjourn the proceedings pending the outcome of its reference to the European Court of Justice (ECJ). The Tribunal has asked the Court of Justice to comment on the following two questions:

"1. Is Article 7 of Council Directive 93/104/EC consistent with provisions of national law which allow pay for annual leave to be included in a worker's hourly remuneration and paid as part of remuneration for working time but not paid in respect of a period of leave actually taken by the worker?

2. Does Article 7.2 preclude the national tribunal from giving credit to an employer for such payments when it seeks to give to the applicant an effective remedy according to powers contained in national regulations?"

It is understood that the ECJ will give a ruling on these questions within six months.

Source: Decision of the Employment Tribunals, Case No. 1800174/04, sent to the parties on 9 March 2004.
...back to 23 April 2004

"Normal working hours" and "a week's pay"

Summary: When employees take holiday, the amount of pay for the holiday must not be less than that calculated using the "week's pay" rules. The Court of Appeal confirms that holiday pay must only reflect overtime payments if it is guaranteed under the employment contract.

The Court of Appeal published its decision on 25 March 2004 in the case of D. Bamsey & Ors -v- Albon Engineering & Manufacturing plc. An Employment Tribunal and, subsequently, the Employment Appeal Tribunal, had found that Mr Bamsey and others had correctly been paid holiday pay based on their contractual hours, i.e. 39 hours per week, although the number of hours they had worked in the twelve weeks before taking the holiday had averaged up to 60 hours per week. Although there was no contractual obligation on the employer to provide overtime, the employees were obliged to work overtime when it was provided. The employer had calculated the employee's holiday pay on 39 hours and, as a result, it was only about two thirds of what they believed they were entitled to.

The Working Time Regulations 1998 (WTR) state that the rules for calculating the rate at which holiday leave should be paid are those for calculating "a week's pay", as set out in the Employment Rights Act 1996 (ERA), in sections 221 to 224. In particular, the Court of Appeal considered the meaning of the term "normal working hours", as defined in section 234 of ERA. If the additional hours worked by the appellants were "normal working hours", they would be entitled to holiday pay based on those hours.

Section 234 of ERA states that employees have "normal working hours" where they are entitled to overtime pay if they work more than a fixed number of hours in a week (or other period). If so, their normal working hours are

• the fixed number of hours, or
• where the contract defines a number, or minimum number, of employment hours in the week (or period), and that number of hours is more than the number of hours without overtime, the higher number of hours.

In other words, if the employment contract guarantees overtime working for a number of hours above the basic working week, the "normal working hours" are the guaranteed hours, not the basic hours.

For example, if the contract allows for the payment of overtime when weekly working hours exceed 40, the "normal working hours" are 40. If the contract defines the basic weekly hours as 40 but guarantees the payment of overtime for an additional five hours each week, the "normal working hours" are 45.

The Appeal Court's decision
The ERA, in sections 221 to 224, provides a set of rather complex rules for determining the way in which "a week's pay" is calculated. The following summary is given in the Court's decision:

1. Where pay for normal working hours does not vary according to the amount of work done in any period or as to when the normal working hours are worked, the determination of "a week's pay" does not depend on an employee's "normal working hours"; it is the weekly amount payable under the contract at the relevant calculation date.
   
   
2. Where there are no "normal working hours", "a week's pay" is the amount of an employee's average weekly pay in the applicable 12 weeks preceding the calculation date.
   
   
3. Where pay varies according to the amount of work done during "normal working hours" in any period, "a week's pay" is calculated at an average hourly rate of pay in the applicable 12 weeks before the calculation date.
   
   
4. Where, in category 3, the contract does not provide for overtime, but an employee undertakes it voluntarily at his employer's request, the overtime hours are not part of the "normal working hours".
   
   
5. Where, in category 3, an employee is under a contractual duty to do overtime but is not entitled to it, the overtime hours are not part of the "the normal working hours".
   
   
6. Where, in category 3, an employer has a contractual duty to provide overtime and an employee has a matching contractual duty to do it, the "normal working hours" would include the overtime worked.

It must be noted that these rules are used to determine the amount of pay due for a week, or some other period, in many different employment situations, including statutory redundancy pay, various "time off with pay" provisions, medical and maternity suspension pay, pay during periods of notice, and the calculation of various tribunal awards. The WTR, in Regulation 16, also requires the "week's pay" provisions of the ERA to be used when calculating payment for periods of holiday leave.

However, the WTR does not provide a definition of the term "normal working hours" and the Court of Appeal had to consider whether the definition in section 234 of ERA applies in the context of holiday pay, and whether the WTR properly implements the source European Directive. The following are some of the arguments presented on behalf of the appellants.

• The Directive requires member states to ensure that workers are paid, when on annual leave, by reference to what they are normally paid for working time, i.e. the actual time for which they work, so as to ensure a broad equivalence between their working time pay and their holiday pay.
  
  
• The definition of "normal working hours" in section 234 of ERA is given in a different chapter of the Act and, as a result, the definition does not apply to sections 221 to 224.
  
  
• It cannot be intended that the WTR would use the definition of "normal working hours" in the ERA as it would result in employees being paid less when taking holiday than when they are at work and thereby deter employees from taking their annual leave. It would also allow employers to keep contractual basic working hours to a minimum in order to keep holiday pay at a low level.
  
  

The Court of Appeal's decision was as follows:

• The section 234 definition clearly applies to the rules for determining "a week's pay" as it would otherwise be unclear, on a case by case basis, whether overtime should be taken into consideration.
  
  
• The WTR provision that the "week's pay" rules in sections 221 to 224 of the ERA are used to calculate payment for periods of leave means that the definition of "normal working hours" in section 234 must also apply.
  
  
• The use of the ERA's "week's pay" rules for calculating holiday pay is not inconsistent with the European Directive, which allows the method by which payment for holiday leave is to be calculated to be decided "by national legislation and/or practice". The Directive makes no specific requirement that pay during holiday periods should be the same as that paid while working.
  
  
• There was no evidence presented to substantiate the arguments that (1) employees as a generality would be discouraged from exercising their entitlement to paid annual leave if their holiday pay were calculated by reference to the section 234 definition, or that (2) employers abuse the rules in order to reduce their holiday pay liabilities.
  
  
• The appeal was dismissed unanimously by the judges.

Implications for employers
This decision clarifies the application of the "week's pay" rules in only one of a number of situations tackled by the ERA, i.e. where an employee's pay does not vary during normal working hours. In that situation, holiday pay is based on the employee's "normal working hours" (i.e. basic hours if there is no guaranteed overtime, or the hours that include the guaranteed hours if there is guaranteed overtime) and the employee's hourly rate of pay.

There are, however, other situations covered by the "week's pay" rules, i.e.

• where pay varies for work done during normal working hours because it includes commission or other variable payments
• where pay varies for work done during normal working hours because those hours qualify for different rates according to when they are worked
• where there are no normal working hours
• where an employee has less than twelve weeks' service.

Other than in the last situation, the calculation of holiday pay must take into consideration the employee's earnings and hours, as appropriate, in the 12 week's prior to the period of holiday.

These rules, now over 40 years old, are complex and difficult to apply in many modern employment situations. Full notes that explain the "week's pay" rules, including worked examples, are available from Payroll Solutions.
Source: www.courtservice.gov.uk/...htm
...back to 4 April 2004

Holiday leave and maternity leave

The European Court of Justice (ECJ) made the following ruling on 18 March 2004, as reported in a European Commission press release, in the case María Paz Merino Gómez v Continental Industrias del Caucho SA.

Ms Gómez, an employee with Continental Industrias, was on maternity leave from 5 May to 24 August 2001. That period coincided with one of the periods of annual leave in her workshop, which had been fixed in a collective agreement. When she nonetheless applied to take her annual leave following her maternity leave, Continental Industrias turned down her application.

Ms Merino Gómez brought proceedings before the Spanish courts. The national court has referred questions to the Court of Justice on directives concerning the organisation of working time, the protection of pregnant workers and equal treatment for men and women.

The Court started by observing that paid annual leave of at least four weeks, provided for by the directive on the organisation of working time, is a particularly important principle of Community social law. Its aim is to ensure that workers take a proper break. The purpose of maternity leave is different: such leave is intended to protect a woman's physical condition throughout the relevant period and to protect the special relationship between a woman and her child after childbirth.

Next, the directive concerning the protection of pregnant workers provides that, in principle, the rights connected to an employment contract must also be ensured in a case of maternity leave: including the right to paid annual leave.

Finally, the determination of when paid annual leave is to be taken falls within the scope of the directive on the principle of equal treatment. The directive also allows provisions to be adopted which are intended to protect women during pregnancy and the period following childbirth. Those provisions may not, however, result in unfavourable treatment regarding their working conditions.

Consequently, Community law requires that a worker should be able to take her annual leave during a period other than the period of her maternity leave, including in a case in which the period of maternity leave coincides with the general period of annual leave fixed, by a collective agreement, for the entire workforce.

In the UK, the DTI's guidance is that paid holiday leave, as provided for by the Working Time Regulations 1998, may not be taken during maternity leave. This may create some difficulties when a woman is on leave for a full year and is accruing holiday entitlement throughout that period. The DTI has recommended that employers arrange for women to take their entitlement before they start their maternity leave or give notice to return from leave early and then take their paid holiday leave.

This ECJ decision is particularly relevant to employers who close their premises at particular times of the year. If a woman is on maternity leave during the two-week summer closure, that two week period may not be counted as part of her annual leave entitlement. Her four weeks statutory period of leave may not be taken while she is away on leave.
Source: curia.eu.int/en/actu/communiques/index.htm
...back to 26 March 2004

Working time rules for flight crews

The Civil Aviation (Working Time) Regulations 2004 come into force on 13 April 2004 and implement the European Directive on the Organisation of Working Time of Mobile Workers in Civil Aviation. The Regulations apply to persons employed as crew members on board civil aircraft.

The key elements of the new Regulations are

• four weeks paid annual leave entitlement
• health assessments to ensure fitness to work at night
• a pattern of work that affords adequate rest breaks
• flying time may not exceed 900 hours in a year
• working time may not exceed 2,000 hours in a year
• rest days of not less than 7 in a month and 96 in a year.

Source: www.hmso.gov.uk/si/si2004/20040756.htm
...back to 26 March 2004

Holiday decisions to be appealed

The Employment Appeal Tribunal (EAT), in response to an appeal brought by the Commissioners of the Inland Revenue against the decision of another Appeal Tribunal that employees are entitled to paid holidays while on extended sickness absence, has given leave for the decision to be heard by the Court of Appeal.

The recent decision EAT decision followed the precedent set in the case Kigass Aero Components -v- Brown, heard in 2002. That earlier tribunal ruled that, under the provisions of the Working Time Regulations (WTR),

• there is no pre-condition that a worker must be at work before taking holiday leave, as there is, for example, in the case of rest breaks
• the only pre-condition defined in the Regulations is that a worker must give the appropriate advance notice to the employer to take holiday leave, either that defined in the contract or the defined statutory notice period
• therefore, a worker absent from work on medical grounds may give notice to take paid holiday leave and, on completion of that leave, return to sick leave.

The Kigass decision requires the absent employee to give notice to take holiday. More recent EAT decisions have indicated that entitlement to paid holiday leave under the provisions of the WTR does not depend on the giving of notice. For example, in another case in 2002, List Design Group Ltd -v- Douglas, and in the very recent case, Canada Life -v- Gray and Farrar, the employees were able to claim unpaid holiday pay in circumstances where the employer was not prepared to pay it. (See news item of 23 January 2004)

The latest EAT declined to reconsider decisions that had already been heard by other EATs, stating that "If Kigass is to be changed, it must, in our judgment, be done by the Court of Appeal, who will take into account also whether there needs to be reconsideration of overruling, or at any rate, distinguishing List and Canada Life, while doing so, if they are to overrule Kigass, or at any rate to limit its consequences." It allowed the appeal, but added that "it may be that this whole question can only be resolved by legislation".
Source: www.employmentappeals.gov.uk/uploads/UK...
...back to 5 March 2004

Failure to pay holiday pay

The Employment Appeal Tribunal (EAT) sitting in London has given a further ruling on issues surrounding the right of workers to paid holiday leave. In a decision given on 13 January 2004, in the case Canada Life -v- Gray and Farrar, the EAT considered the position of two self-employed contractors and whether they were entitled to holiday pay despite never taking any holiday leave, and whether the non-payment of holiday pay constituted an unlawful deduction from wages.

Mr Gray and Mr Farrar worked as commission agents for Canada Life. They had been employed since 1975 and 1968 respectively but, between 1 October 1998 and the termination of their employment on 31 October 2002, they had not been paid holiday pay. The original employment tribunal had decided that, as self-employed consultants engaged under commission-only contracts that did not provide for holiday pay, they were nevertheless workers and entitled to paid holiday leave under the provisions of the Working Time Regulations 1998 (WTR). As they had not been paid holiday pay since the WTR took effect, they had suffered unlawful deductions from their wages and were awarded £30,000 and £19,000 respectively.

The EAT upheld the employment tribunal's decisions in full and made the following findings:

• The right to holiday pay is not dependent on an employee actually taking leave. When the WTR was introduced, Mr Gray and Mr Farrar had asked for holiday pay but Canada Life had told them, mistakenly, that they were not entitled to it. Consequently, since 1998, both men had been denied their right to holiday pay.
• The Employment Rights Act 1996 defines "wages" for the purpose of unlawful deduction as including holiday pay, 'paid under the employee's contract or 'otherwise', i.e. under the WTR. There were, therefore, a series of unlawful deductions between 1998 and the termination of employment in October 2002.
• Paid holiday leave under the WTR is a health and safety matter. It is the employer's responsibility to give workers their paid holiday leave entitlement. It is the employee's responsibility to give notice to take holiday and the restriction on carrying untaken holiday into another holiday year is a discouragement for the employee from not taking the full entitlement.

These EAT findings send two important messages to employers:

1. Self-employed contractors, i.e. those "carrying on a business undertaking" but for whom the employer is not a client of that business undertaking, meet the WTR definition of "worker" and are entitled to paid holiday leave. The principle is already well established in previous EAT decisions. Such workers must be identified and given their statutory holiday entitlements, both during the period of their engagement and on termination.
2. If such workers have asked for holiday pay and been told, wrongly, that they are not entitled to it, the non-payment of holiday pay constitutes an unlawful deduction of wages. If the worker makes a complaint to a tribunal, as knowledge of these decisions spreads, they may win a claim for unpaid holiday pay dating back to October 1998. In the current case, the two men actually asked for holiday pay and were denied it. However, it is not clear that actually enquiring about holiday pay is a requirement for a finding of unlawful deductions from wages.

Source: www.employmentappeals.gov.uk/judge_fr.htm and search for "Canada Life".
...back to 23 January 2004

Continuity of service and holiday pay

The decision of the Employment Appeal Tribunal (EAT) on 16 December 2003 in the case Brayshaw -v- Lambeth Community of Refugees from Vietnam provides some insight into continuity of employment issues and in the calculation of holiday pay on termination.

Ms. Bradshaw had been employed as a tutor of English as a second language on three occasions, from 10 September to 17 December 2001, from 7 January to 15 April 2002, and from 22 April to 25 July 2002. She had made a tribunal claim for termination holiday pay and the employment tribunal had awarded her one week's holiday pay under the provisions of the Working Time Regulations 1998 in respect of her last period of employment. She appealed that decision on the basis that she was entitled to holiday pay covering all three periods of employment.

The EAT agreed that she had continuous employment (as set out in section 212 of the Employment Rights Act 1996) covering all three periods:

• in the case of the second and third periods, 15 April and 22 April 2002 were Mondays on consecutive weeks, so both periods were linked for continuous service, and
• in the case of the first and second periods, as Ms. Brayshaw was employed for separate school terms, the Christmas vacation gap between the two terms was a "temporary cessation of work" that did not break her continuous employment.

As a result, she was entitled to termination holiday pay in respect of the full period, from 10 September 2001 to 25 July 2002. The method used by the EAT to calculate her payment is interesting.

Regulation 14 of the Working Time Regulations 1996 requires an employer to make a payment in lieu of holiday leave where "the proportion of leave taken by the worker is less than the proportion of the leave year which has expired". The formula for calculating termination holiday pay is (A × B) - C, where

1. is the period of leave to which the worker is entitled,
2. is the proportion of the worker's leave year which expired before the termination date, and
3. is the period of leave taken by the worker between the start of the leave year and the termination date.

However, the Regulations do not explain how the "proportion" of leave taken and the leave year are calculated. As, presumably, Ms. Brayshaw had no defined holiday year, the EAT took the proportion of her period of employment that had passed by her termination date as 87.12%, i.e. the number of days from 10 September 2001 to 25 April 2002, compared with 365 days. The use of days to measure entitlement is more accurate than using whole calendar months, the approach favoured by many employers. The Regulations do, however, allow employers to use any other method of calculation as defined in collective agreements or contracts of employment.

(Source: www.employmentappeals.gov.uk/judge_fr.htm and search for "Brayshaw" as the appellant. )
...back to 9 January 2004

Consultation on the Working Time Directive

The European Commission has launched a consultation on working time issues. A report prepared for the EC on the workings of current EU legislation in this area focussed on the "opt-out", which allows individuals to waive their rights under the directive, and the definition and calculation of working time.

According to the EC, "the Working Time directive plays a vital role in protecting the health and safety of workers from the effects of working excessively long hours, having inadequate rest and disruptive work patterns. It can also contribute to improved productivity and a better reconciliation of work and family life."

In 1993, the UK negotiated an opt-out provision that allows Member States not to apply the limit to working hours under certain conditions, i.e.

• prior agreement of the individual,
• no negative fall-out from refusing to opt out, and
• records kept of working hours of those that have opted out.

Until recently, the UK was the only EU member to make use of the opt-out and, in fact, removed the last of the above three conditions from the domestic Regulations in December 1999. More recently, France, Germany, Netherlands, Spain and Luxembourg have prepared or have passed legislation to allow restricted use of the opt-out.

The Commission's report finds that not all the guarantees laid down within the Directive are being provided. It is concerned, for example, that workers are frequently asked to sign the opt-out agreement at the same time as signing their employment contract, which acts as a constraint to freedom of choice.

The consultation asks for responses on 5 main issues, with a view to a future revision of the Directive:

• the length of reference periods, currently set at four months, with certain provisions allowing for 6 months or a year
• the definition of "working time" following recent European Court of Justice rulings on time spent on call
• the conditions for the application of the opt-out
• measures to improve the balance between work and family life
• how to find the best balance of these measures.

The deadline for responses to the consultation is 31 March 2004. The text of the consultation can be found at http://europa.eu.int/...htm .

In the UK, both the CBI and the TUC have commented on this new consultation.

The CBI says: "This review must not lead to the removal of that vital freedom. UK employees have more choice about the hours they work than those almost anywhere else in Europe. They value that flexibility and so do employers. We accept there must be safeguards to prevent abuse but the current legislation offers that. The Commission and the TUC have both failed to find evidence of widespread abuse. We do not believe that employers are routinely pressurising workers into signing opt-outs."

The TUC says: "The Commission is right to express concern at the way the Directive has been applied in the UK. We've had rules on working time for over five years but, because of lax enforcement and the individual opt-out, UK workers still work the longest hours in Europe. Evidence collected by the TUC shows that many workers do not know their rights or, even if they do, many often feel pressurised by their employers to sign themselves out of working time protection."
(Sources: http://europa.eu.int/rapid/...
http://europa.eu.int/rapid/start/...
www.cbi.org.uk/ndbs/...
www.tuc.org.uk/work_life/tuc-7469-f0.cfm )
...back to 9 January 2004

Calculator to work out unpaid overtime

In support of its campaign to highlight the level of unpaid overtime performed by workers in the UK, the TUC has introduced an on-line calculator that reports how much workers would have earned for their extra hours if they were paid their normal hourly rate, or at time and a half.
(Source: www.worksmart.org.uk/overtime_calc.php )
...back to 21 November 2003

Rolled-up holiday pay

In an attempt to settle the ongoing issues raised by the decisions of a number of employment tribunal and employment appeal tribunals in recent months involving rolled-up holiday pay, the employment appeal tribunal (EAT) in London delivered its judgement on 24 July 2003 in the case of six pending appeals.

Rolled-up holiday pay is the practice of some employers to include an amount representing holiday pay in employees' regular wages. No holiday pay is paid when holiday is actually taken. The issue is whether or not the Working Time Regulations 1998 (WTR) permit the payment of holiday pay at any time other than when the holiday leave is taken.

Two notable EAT decisions have given conflicting decisions on this issue. In MPB Structures Limited v Munro (see newsletter of 25 April 2003), the payment of rolled-up holiday pay was declared unlawful on the basis that the WTR and the source European Directive provide one single right to paid leave, with the result that holiday pay must be paid at the time that holiday is taken. In an earlier case, Gridquest Ltd & Others -v- Blackburn & Others, the EAT ruled that rolled-up holiday pay could discharge an employer's liability for holiday pay if it was clear that the rate of pay included an element of holiday pay, even though the rate had not been agreed between the parties.

The Gridquest decision was subsequently overturned by the Court of Appeal on the basis that a week's pay could not be said to include an amount for something else, such as holiday pay, unless the employer and employee have agreed to it. However, the Court of Appeal declined to rule on whether, if there had been such an agreement, rolled-up holiday would have been unlawful.

In view of the uncertainties raised by these decisions, a number of tribunal appeals were held over to be heard together by the EAT in June 2003. The decision has been eagerly awaited by employers in a number of high turnover industries, including employment agencies, where payment of rolled-up holiday pay is a common practice. There was particular concern where the amount included in the rate of pay in respect of holiday pay was not clear and it was possible for employees to make claim for unpaid holiday pay on top of the wages already paid.

There are three provisions of the WTR that are particularly relevant to these cases:

• Regulation 13 - annual entitlement is to four weeks, and it may not be replaced by a payment in lieu except where the worker's employment is terminated
• Regulation 16 - payment for any period of annual leave at the rate of a week's pay in respect of each week of leave, and any contractual remuneration paid in respect of a period of leave goes towards discharging the employer's liability to pay holiday pay under the WTR for that period of leave
• Regulation 35 - any provision in an agreement is void in so far as it purports to exclude or limit the operation of any provision of the WTR, unless the WTR provide for an agreement to have that effect.

The EAT considered the issues raised by the six cases under appeal under five specific categories:

1. contracts between the worker and the employer which are silent in relation to holiday pay
2. contracts which purport to exclude any liability for or entitlement to holiday pay
3. contracts where the rates are said to include holiday pay, but there is no indication or specification of an amount
4. contracts providing for a basic wage or rate topped up by a specific sum or percentage in respect of holiday pay
5. contracts where holiday pay is allocated to and paid during (or immediately prior to or immediately after) specific periods of holiday.

The situation in category 5 is the normal arrangement for many employers and meets in full the requirements of the WTR. It applies in circumstances where holiday is paid in advance of the holiday, a common practice for weekly-paid employees, and where employees are paid their normal salary while away on holiday.

The EAT ruled that contracts that fall within categories 1, 2 and 3 will always fall foul of the Regulations. There is either no contractual remuneration to set off against the Regulation 16 entitlement, or payment is being made in lieu of holiday in circumstances other than termination (Regulation 13) and, as a result, the provision is void (Regulation 35).

However, the EAT ruled that a contract within category 4 that provides for holiday pay in respect of contractual holiday entitlement, even though it is paid throughout the year, is an entitlement to "contractual remuneration paid in respect of a period of leave" (Regulation 16) even though, when it is paid, it may not be possible to allocate it specifically to any particular period of holiday. Nevertheless, there must be contractually a specific sum or percentage allocated to holiday pay in order to ensure that

• there is a contractual payment under Regulation 16, and
• a specific sum will have been paid during the year so as to satisfy any later entitlement to holiday accrual on termination.

The EAT gave the following advice to employers, trade unions and employees so that they can ensure that, where holiday pay is rolled-up with wages, all the provisions of the WTR are met:

1. The rolled-up holiday pay must be clearly incorporated into the individual contract of employment, and thus expressly agreed.
2. The allocation of the percentage or amount to holiday pay must be clearly identified in the contract, and preferably also in the payslip.
3. It must amount to a true addition to the contractual rate of pay.
4. Records of holidays taken must be kept.
5. Reasonably practicable steps must be taken to require the workers to take their holidays before the expiry of the relevant holiday year.

(Source: www.employmentappeals.gov.uk/judge_fr.htm
and search for "Marshalls Clay" as the appellant)
...back to 1 August 2003

Working Time Regulations

The provisions of the European Working Time Directive are to be extended, from 1 August 2003, to most of those groups of workers who, until now, have been excluded from the UK's domestic Working Time Regulations.

All of the working time measures apply to

• non-mobile workers in the road, sea, inland waterways and lake transport sectors,
• all workers in the railway and offshore sectors, and
• all workers in the aviation sector who are not covered by the Aviation Directive.

More limited protections apply to mobile workers in the transport sectors. Those who are subject to the rules governing drivers' hours are entitled to 4 weeks paid annual leave and to health assessments if they are night workers. Those not covered by drivers' hours rules will have the average 48-hour per week protection, 4 weeks paid leave, health assessments if they work nights, and rest breaks.

The Government has published its response to the public consultation that took place at the end of 2002. In general, the Government has decided to implement the European Directive by taking advantage of all of the available derogations (exemptions) and "with as much flexibility and as little cost to business as possible".

The new Regulations take effect from 1 August 2003, and from 1 August 2004 in the case of junior doctors. In more detail, the Working Time (Amendment) Regulations 2003 make the following changes:

• a "mobile worker" is any worker employed as a member of travelling or flying personnel by an undertaking which operates transport services for passengers or goods by road or air
• "offshore work" is work performed mainly on or from offshore installations (including drilling rigs), directly or indirectly in connection with the exploration, extraction or exploitation of mineral resources, including hydrocarbons, and diving in connection with such activities, whether performed from an offshore installation or a vessel
• None of the provisions of the Working Time Regulations apply to seafarers to whom the Seafarers Directive applies, workers on board sea-going fishing vessels and workers on ships and hovercraft that operate services for the passengers or goods by inland waterway or lake transport.
• The following workers are not covered by the provisions for weekly working time, night working limits, rest breaks and periods, paid annual leave, and night work health assessments:
  • workers in the armed forces or emergency services whose activities inevitably conflict with the Regulations,
  • crew members on board civil aircraft
  • doctors in training until 1 August 2005.

• Mobile workers covered by the Road Transport Directive are not covered by the provisions for weekly working time, night working limits, and rest breaks and periods.
• The following workers, in addition to those already excluded, are not covered by the provisions for night working limits and rest breaks and periods,
  • offshore workers
  • doctors in training
  • workers on regular urban passenger transport services
  • workers on board trains and whose activities are linked to transport timetables
  • mobile workers.

• Mobile workers, other than in unforeseeable or exceptional circumstances, are entitled to "adequate rest", defined as "regular rest periods, the duration of which are expressed in units of time and which are sufficiently long and continuous to ensure that, as a result of fatigue or other irregular working patterns, he does not cause injury to himself, to fellow workers or to others and that he does not damage his health, either in the short term or in the longer term."
• The working time limit for doctors in training will be 58 hours from 1 August 2004, and 56 hours from 1 August 2007, averaged over a 26-week reference period.
• The reference period for averaging the working time limit for offshore workers is 52 weeks.
• The enforcement rules are changed so that responsibility for enforcing the weekly time limit, the night working limit, rest breaks and periods and record keeping lies with
  • the local authority, acting under guidance provided by the Health and Safety Commission, in premises for which the local authority is responsible
  • the Civil Aviation Authority, in relation to civil aviation workers
  • the Vehicle and Operator Services Agency, in relation to road transport workers
  • the Health and Safety Executive in all other circumstances.

• A new Schedule to the Regulations makes provision for the enforcement authorities to enforce the Regulations through inspectors and sets out the powers of the inspectors.

(Source: www.dti.gov.uk/er/work_time_regs/hadgovresp.pdf and www.hmso.gov.uk/si/si2003/20031684.htm )
...back to 18 July 2003

48-hour working week opt-out

Workers in the UK have the option of giving up the right not to work more than 48 hours per week on average by voluntarily signing an opt-out agreement. The concession from the provisions of the European Working Time Directive applies only to adult workers in the UK. In December 1999, the Government removed the record-keeping requirement for workers who had signed an opt-out agreement. Young workers, i.e. those under 18, were removed from the scope of the concession from April 2003.

The UK's concession expires in November 2003. If the concession is not renewed, it will become illegal for UK workers to work more than 48 hours on average. The European Commission is already giving consideration as to whether the concession should be extended. The CBI is actively campaigning on the matter, but the TUC has not yet issued any statements.

The CBI is treating the end the concession as "another increase in labour regulation". A report commissioned by the CBI states that 60% of the employers surveyed said that removal would have "a significant or severe" impact on business. It suggests that 18 per cent of staff regularly use an opt-out in companies from all parts of the economy, with the greatest use among smaller firms.

The CBI Director-General, Digby Jones, argues that "People should have a right to say 'no' to long hours and the directive rightly gives them that protection. But they don't want unions and politicians telling them when they can work or for how long. That would be the over-zealous interference of the nanny state."
(Source: www.cbi.org.uk/ndbs/press.nsf/0363c1... )
...back to 3 July 2003

Meaning of "worker" for holiday pay

Another decision involving entitlement to holiday pay under the Working Time Regulations 1998 (WTR) was given by the Employment Appeal Tribunal (EAT) on 20 May in the case of Redrow Homes (Yorkshire) Ltd vs. Wright, Roberts and others. Redrow Homes were appealing two employment tribunal decisions that a number of bricklayers, including Mr. Wright and Mr. Roberts, were "workers", and were thus entitled to paid holiday leave.

The particularly interesting aspect of this case is that all of the parties involved, including the original tribunals and the EAT, accepted that Wright and Roberts were self-employed tradesmen. The issue under consideration by the EAT was whether a self-employed individual could fall within the statutory definition of "worker".

According to Regulation 2(1) of the WTR,

"'worker' means an individual who has entered into or works under (or, where the employment has ceased, worked under) -

(a) a contract of employment; or

(b) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual."

There was agreement that the tradesmen were not employed under a contract of employment. The issue, therefore, was whether the nature of their working relationship with Redrow met the three requirements in paragraph (b), i.e.

1. the individual must work under a contract,
2. under that contract, the individual must "undertake to do or perform personally any work", and
3. the other party to the contract must not be a client or customer of a business undertaking carried on by the individual.

The EAT held that all three requirements applied to the tradesmen. The contract was a contract for personal service. Although the tradesmen were self-employed, i.e. were in business on their own account, they were not carrying on a business undertaking of which Redrow was a customer or client.

The EAT dismissed the appeal and upheld the tradesmen's right to paid holiday leave.

This decision raises some significant issues that are different to the problem faced by many employers in deciding whether individuals are employees or self-employed for tax and NICs purposes. In the context of the WTR, the most significant issue is whether or not a self-employed individual is "carrying on a business undertaking". The factors that may be used to determine whether there is a business undertaking were defined by one of the original tribunals and endorsed by the EAT, namely,

• the bricklayers worked exclusively for Redrow during the relevant period
• they could be ordered to rectify defective work
• the payment method was a fixed hourly rate or piece rate
• there was no opportunity to profit and there was no risk of loss
• payments were subject to tax on account (i.e. they held CIS4 registration cards rather than the CIS5 or CIS6 certificates that would have indicated that they were operating as a business).

Therefore, businesses that engage contractors - including those outside of the construction industry - even if they may properly be treated as being self-employed, should consider carefully whether the contractors are "carrying on a business undertaking" and the business is a client of that business undertaking. If the factors listed above apply, the self-employed individual may be, by definition, a "worker" and entitled to statutory paid holiday leave.
(Source: www.employmentappeals.gov.uk/judge_fr.htm )
...back to 6 June 2003

Holiday leave year

In yet another Employment Appeal Tribunal (EAT) hearing on issues related to the paid holiday leave provisions of the Working Time Regulations 1998 (WTR), the tribunal considered an appeal against an employment tribunal decision that a police constable had been underpaid holiday pay on termination of employment.

The calculation of termination holiday pay is based on the period between the start of the employee's leave year and the date of termination. For many employees, the leave year is the same as the holiday year as defined in a "relevant agreement", i.e. "a collective agreement which forms part of a contract between him and his employer, or any other agreement in writing which is legally enforceable as between the worker and his employer." However, if the holiday year is not defined, the default holiday year runs from

• 1 October, if the employment began before 1 October 1998, or
• the first day of the month that followed the date on which the employment began, if the employment began after that date.

In the case Hyman vs. Chief Constable of South Wales Police, Mr. Hyman had started working as a policeman on 22 September 1986 and retired on 27 January 2002. The original tribunal chairman had decided that Mr. Hyman

• did not work under a contract of employment, but under the terms of the Police Regulations 1995 and various Standing Orders, and
• there was no 'relevant agreement' defining holiday pay rules.

As a result, in the absence of a contractual provision and because he started as a policeman before 1 October 1998, Mr. Hyman's leave year started on 1 October each year.

Mr. Hyman had, therefore, received holiday year on termination counting from 1 October, rather than from 1 April, as defined in the South Wales Police Standing Order 1/23. He claimed he had been underpaid and the employment tribunal ruled against him.

The EAT disagreed with the employment tribunal's decision. It ruled that

• under the WTR (Regulation 41), the office of constable is to be treated as employment, and
• the Regulations and Orders constitute a written agreement that is legally enforceable.

His leave year was therefore to be treated as starting on 1 April and Mr. Hyman was entitled to the additional termination holiday pay.

To avoid this kind of misunderstanding, employers should ensure that the start of each holiday leave year is defined precisely in contracts of employment and any other documents that relate to the workers to whom the WTR apply. These include employees, most agency workers and freelancers, workers doing in-house training, and trainees on work experience, e.g. a National Traineeship or involved in New Deal.
(Source: www.employmentappeals.gov.uk/judge_fr.htm )
...back to 30 May 2003

Statutory holiday leave and pay

In a judgement given on 1 April 2003, the Scottish Court of Session confirmed the decision of the Employment Appeal Tribunal (EAT) on 16 April 2002 that statutory holiday leave under the provisions of the Working Time Regulations 1998 should be paid at the time that it is taken, not as a regular addition to wages.

The case, M P B Structures Ltd v. Munro, considered the employer's practice of paying an additional 8% on top of Mr. Munro's wages, with instructions for him to ensure that he saves sufficient of his earnings to cover his four weeks' holiday entitlement. The employers were appealing the decision of the EAT that "the only way that the provisions of the Regulations and, indeed, their spirit can be met, is for holiday pay to be paid as and when the holiday is taken at the appropriate rate".

The Court considered whether holiday leave and holiday pay are two separate entitlements. The Regulations may give this impression because the rules for each are set out in two separate regulations. The court, however, looked back at the European Directive on which the domestic regulations are based and took the view that "the Directive treats the right to annual leave and to payment for it as part of a single entitlement".

Although the Court found that the employer had not adopted the arrangement of "rolling up" the holiday pay in order to avoid payment, it stated: "This arrangement was, we consider, not in accordance with the requirements of the Regulations, and would tend to lead to situations in which workers were discouraged from taking their holidays when they would otherwise have sought to do so, and hence it would have conflicted with what the Regulations and the Directive sought to achieve."

Although given by a Scottish court, this decision confirms the findings of the Employment Appeal Tribunal in connection with UK legislation and is, therefore, relevant to all employers in the UK.
(Source: www.scotcourts.gov.uk/opinionsv/xa80_02.html)
...back to 25 April 2003

Statutory holiday pay

A number of employment tribunal decisions around the subject of the statutory holiday provisions of the Working Time Regulations 1998 (WTR) have been reviewed by Employment Appeal Tribunals over the past year. The latest involves workers whose normal working hours were 39 but who regularly worked voluntary overtime, to the extent that their average weekly hours in the period up to the holiday that was being complained about were around 58. They were paid holiday pay based on their pay for 39 hours, not for 58 hours. The "week's pay" rules, as defined in the Employment Rights Act 1996 (ERA) are used to determine the minimum payment for statutory holiday pay. The statutory "week's pay" rules exclude non-obligatory overtime hours from the definition of "normal working hours" and, as a result, the employment tribunal found that the workers' "normal working hours" were 39. They were, therefore, only entitled to be paid the 39-hour rate.

The key argument for the appeal was that, as the definition of "normal working hours" in the ERA is not specifically referred to in the WTR, the worker's "normal working hours" should be interpreted as meaning the hours they normally work each week rather than the working hours defined in their contracts, excluding obligatory overtime.

The Employment Appeal Tribunal did not accept that argument and held that it would be impracticable to apply the "week's pay" rules in the absence of the "normal working hours" rule. The appeal was dismissed but leave was granted to appeal to the Court of Appeal.
(Source: www.employmentappeals.gov.uk/judge_fr.htm , and search for Bamsey in the "Apellant" field. This should find Bamsey and others v. Albion Engineering Ltd.)
...back to 4 April 2003

New Working Time Limits for Young Workers

After two and a half years without clear rules, the Government has made Regulations that impose working time limits on young workers. When the Working Time Regulations 1998 came into force, implementing the European Working Time Directive and the Young People at Work Directive, the UK obtained a temporary opt-out from the rules that prevented young workers from working for more than 40 hours a week, and at nights. Until the opt-out expired in June 2000, young people who were above the school-leaving age but not yet 18 were treated as adults in relation to the 48-hour week and night working. They could, if they wished, sign an opt-out agreement allowing them to work more than 48 hours on average per week. The only safeguard for night work was that the employer was obliged to offer a free health and capacity assessment.

Since June 2000, the only young workers protected by the Young People at Work Directive have been those working in the public sector, to whom the Directive applies directly. Young workers in the private sector have had no protection other than that afforded to adults.

The Working Time (Amendment) Regulations 2002 introduce two new regulations into the 1998 Regulations. They were approved in mid-December and come into force on 6 April 2003.

Maximum working time

The first new regulation limits the working time of young workers to eight hours a day, or 40 hours a week. A week for this purpose runs from Monday to Sunday. Employers are required to "take all reasonable steps, in keeping with the need to protect the health and safety of workers, to ensure that the limits … are complied with".

If a young worker has two or more jobs, the daily and weekly limits apply across all of them. An employer must, therefore, take reasonable measures to find out if a young worker is employed elsewhere and ensure that, overall, the limits are complied with.

There is no provision for averaging working hours over a reference period; the limit applies to any day and to any week. There is no provision for opting-out voluntarily.

Night work

The second new regulation requires employers to ensure that young workers do not work between the hours of 10 pm and 6 am or, if the worker's contract requires work to be performed after 10 pm, between 11 pm and 7 am.

Exceptions

There are a limited number of situations where working time limits may be exceeded or night working is permitted:

• young workers employed as domestic servants in private households
• young workers serving as members of the armed forces
• young workers employed on ships (otherwise protected under Merchant Shipping and Fishing Vessels Regulations)
• young workers whose work is necessary in exceptional circumstances, provided that the circumstances were beyond the employer's control or could not have been avoided despite all due care by the employer, and there is no adult worker available to do the work, and the requirement is temporary and must be performed immediately.

The following further exception applies to maximum working time but only in certain situations to night working:

• young workers whose work in necessary to maintain continuity of service of production, or in response to a surge in demand, provided that there is no adult worker available to do the work and the young worker's education or training will not be adversely affected.

The limited circumstances where this exception applies for night working are:

• where the employment is in a hospital or similar establishment, or is in connection with cultural, artistic, sporting or advertising activities, or
• where the employment is in agriculture; retail trading; postal or newspaper deliveries; a catering business; a hotel, public house, restaurant, bar or similar establishment; or a bakery, but not in any of these employments between midnight and 4 am.

In either of these situations, if the young worker has to work during what would otherwise be a rest period or rest break, the young worker must be supervised by an adult if that is necessary for the young worker's protection, and an equivalent amount of rest must be provided to compensate.

In any situation where a young worker does work at night between 10 pm and 6 am, (or between 11 pm and 7 am), the employer must continue to provide the opportunity of a health and capacity assessment.

Other changes

A worker's average weekly hours are calculated by dividing the total hours worked in the reference period by the number of weeks in the period. However, if the reference period includes any "excluded days", those days are ignored and the hours worked in the same number of days prior to the start of the reference period are included instead. The days that are "excluded" now include any period of maternity, paternity, adoption or parental leave.

The rule that only allows actual overtime hours to be included in the calculation of a worker's normal hours for night working is revoked. In future, any hours of overtime must be included in determining a worker's normal hours.
Payroll Briefing 15 - 4 February 2003

Junior doctors

Doctors in training will be drawn into the scope of the Working Time Regulations 1998 from 1 August 2004. From that date, their weekly working hours will be limited to 58 and they will be entitled to all of the rest break, rest period and paid holiday provisions. The hours limit will be reduced to 56 in August 2007 and finally to 48 in August 2009. There is scope for this final deadline to be extended to 2012.

To help hospitals change their working practices to enable the August 2004 deadline to be met, the Government has published guidance at www.doh.gov.uk/workingtime . Also, from early 2003, pilot schemes are starting in 19 different hospitals to evaluate the recommended measures.
Payroll Briefing 14 - 21 January 2003

Working Time Regulations

A number of business sectors and categories of employees were excluded from the scope of the Working Time Regulations when they became law in 1998. The EC and the member states had agreed that mobile workers in the transport sectors, i.e. road, rail, air, sea, inland waterway and lake, and in sea fishing, offshore oil and gas exploration and the activities of doctors in training required their own special rules. Those rules have now been formally adopted and the Government is consulting on how to implement the new measures in the UK.

Not all of the current requirements of the Working Time Regulations will apply to all workers in those sectors. Most of the measures must be in place by 1 August 2003, although there are extended implementation dates for HGV drivers and junior doctors.

Everyone working in payroll in the affected sectors should obtain a copy of the consultation paper and consider carefully the implications for their operations and, if they anticipate problems with the proposals, make their views known to the Government. The consultation period ends on 31 January 2003. Copies of the consultation paper may be ordered by telephone, on 08456 000925, quoting URN 02/1424, or downloaded from www.dti.gov.uk/er/work_time_regs/hadconsult.htm .
Payroll Briefing 11 - 28 November 2002

Statutory holiday leave

The TUC claims, in a press release that was issued just before the August bank holiday, that a loophole in the Working Time Regulations 1998 allows employers to limit the entitlement of workers to paid holidays to four weeks, including bank holidays. Over 850,000 workers are losing out, it is claimed, and a further 400,000 are being cheated out of their statutory entitlement by employers who don't provide the full four weeks. A contrast is drawn with the average of 37 days annual holidays and bank holidays that are enjoyed by trade union members.

The Working Time Regulations 1998 allow any days for which payments are made to count towards the minimum four weeks entitlement for all workers. This means that any bank holiday, for which the employer makes payment, may be offset against the statutory minimum.

The CBI's response to the TUC's claims was that "employees are not being cheated out of their leave entitlement. Bank holidays may not be a legal right but the overwhelming majority of UK employers give them in addition to annual leave. The average UK worker gets five days more leave per year than the legal entitlement of twenty. It's also a fact that people do not want be told when to take time off. Some employers are responding to employee demand and swapping bank holidays for more flexible leave arrangements."
Payroll Briefing 6 - 12 September 2002

Young Workers Directive

The Working Time Regulations 1998, as originally drafted, allow "young workers" to work the same hours in a week as adults, and to work the same hours at night as adults but with a measure of protection offered by health and capacity assessments. Young workers are young people who have left school but are under age 18. However, the European Young Workers Directive (YWD), the source of the working time rules for young people, requires member states to set more restrictive rules for young workers and, with some concessions, their hours should not exceed 40 hours per week and they should not work at night.

The UK's more relaxed position was made possible under an opt-out from the strict rules and, since 1998, the working time of young workers has been effectively the same as adults. That opt-out expired on 22 June 2000 and, in the two years since then, the UK Government has failed to implement the requirements of the YWD, despite a period of consultation early in 2001. In response to enquiries, the DTI announced a further period of consultation and, nearly six months later, a new consultation document and draft Regulations have been published, with comments requested by 6 September 2002.

The draft Regulations introduce the following new working rules for young workers:

1. Working time may not exceed 8 hours a day, or 40 hours in a Monday to Sunday week, even if the employee has more than one job. Employers must take "all reasonable steps" to ensure the limits are not exceeded. However, the working time may be exceeded in circumstances where:
   
   • the employer requires the young worker to do work which is necessary to maintain continuity of service or production, or to respond to a surge in demand for a service or product, and
   • there is no adult worker available to perform the work, and
   • the young worker's education or training will not be affected by the work.

   
   

2. Night working is not permitted between the hours of 10 p.m. and 6 a.m. or, if the employee's contract provides for working after 10 p.m., between the hours of 11 p.m. and 7 a.m. However:
   
   • working is permitted all night in a hospital or similar establishment, or in connection with cultural, artistic, sporting or advertising activities, in the previously mentioned circumstances, or
   • working is permitted, other than between midnight and 4 a.m. in agriculture, retail trading, a hotel, a bakery, catering activities (other than in a bar or restaurant), or postal or newspaper deliveries, in the previously mentioned circumstances.

   
   

3. In addition (and under existing rules), the daily, weekly and nightly limits may be exceeded where there is no adult worker available to perform work that is of a temporary nature, that must be performed immediately, and that is caused by:
   
   • an unusual and unforeseeable situation that is out of the employer's control, or
   • exceptional events, the effects of which the employer could have done nothing to avoid.

   
   

No changes are planned for other rules for young workers that already differ from those for adults, namely:

• 12 consecutive hours rest between each working day
• 2 days weekly rest
• 30-minute rest breaks when working for more than four and a half hours.

Employers with employees who are below the age of 18 should give immediate thought to the implications of the proposals to their working practices. What problems will the new limits cause? Can they operate within the rules for the proposed exceptional situations? If there are going to be operational difficulties, comments and suggestions should be sent to Jim Logan, Room UG83, Department of Trade and Industry, 1 Victoria Street, London, SW1H 0ET; fax: 020 7215 2868, e-mail jim.logan@dti.gsi.gov.uk , by 6 September 2002. A copy of the proposals and draft Regulations may be obtained from the DTI's website at www.dti.gov.uk/er/individual/youngconsult.htm
Payroll Briefing 3 - 4 July 2002

Termination Holiday Pay

A news item in Issue 2 of Payroll Briefing gave details of a recent Employment Appeal Tribunal decision in the case Hill v. Howard Chapell. The impression has possibly been given that this decision has created a new situation for employers. In fact, the tribunal simply confirmed the existing rules that employers must understand when recovering "overtaken" holiday from an employee's final pay on termination.

The Working Time Regulations 1998 require employers to pay termination holiday pay if employees have not taken their full entitlement in the holiday year. For example, if an employee is entitled to two weeks' holiday in the holiday year up to the date of termination according to the statutory rules but has only taken one week of that entitlement, one week of "undertaken" holiday must be paid on termination.

However, there is no equivalent statutory provision that allows employers to make a deduction from an employee's final pay of "overtaken" holiday pay. For example, if an employee is entitled to two weeks' holiday up to the leaving date but has taken three weeks, the employer cannot, under any statutory rules, recover one week's holiday pay from the employee's final pay. This was the mistake that the original employment tribunal had made in the Hill v. Howard Chapell case. However, the Working Time Regulations do allow employers and employees to enter into a "relevant agreement" for employees to make compensation for "overtaken" holiday by payment or other means. A "relevant agreement" is any written agreement that is legally enforceable, including a collective agreement, i.e. one made with a trade union, or an agreement made with elected workplace representatives, or simply one of a number of terms and conditions set out in an employment contract. In other words, recovering "overtaken" holiday is not a statutory right, but it can be a contractual right. As long as there is something in writing that permits the deduction, and both employer and employee have agreed to the arrangement, the employer may routinely deduct the value of "overtaken" holiday from termination pay.

But, if an employer makes such a deduction in the absence of some contractual provision, that is an unlawful deduction under the 'protection of wages' provisions in the Employment Rights Act 1996. It would be sensible for employers to check that, if they routinely deduct overtaken holiday from termination pay, there is a clear contractual provision allowing them to do it. Otherwise, they may be called to explain themselves to an employment tribunal.
Payroll Briefing 3 - 4 July 2002

Working Time Regulations - excluded sectors

The European Commission and the member States have agreed to extend the provisions of the Working Time Regulations to most of the sectors that were initially excluded. The following list shows the dates by which the sectors must be included into the UK's domestic legislation.

Road Transport

1. implement by 1 August 2003 - full provisions for non-mobile workers; all except for 'night working' and 'adequate rest' for mobile workers
2. implement by 23 March 2005 - night work limit of 10 hours; maximum working week of 60 hours as long as 48-hour average not exceeded over a 4-month period; self-employed temporarily excluded

Rail Transport

1. implement by 1 August 2003 - full provisions for non-mobile workers; limited exemptions for some mobile workers

Air Transport

1. implement by 1 August 2003 - full provisions for non-mobile workers; all except for 'night working' and 'adequate rest' for mobile workers
2. implement by 1 December 2003 - for airborne staff: annual working time limited to 2000 hours, flying time limited to 900 hours, "appropriate" health and safety protection, monthly and yearly number of rest days

Sea Transport

1. implement by 1 August 2003 - full provisions for non-mobile workers
2. implement by 30 June 2002 - for seafarers: maximum hours of work not more than 14 hours in any 24-hour period and 72 hours in any seven-day period; or minimum hours of rest not less than 10 hours in any 24-hour period and 77 hours in any seven-day period

Inland Waterway and Lake Transport

1. implement by 1 August 2003 - full provisions for non-mobile workers; all except for 'night working' and 'adequate rest' for mobile workers

Sea Fishing

1. implement by 1 August 2003 - full provisions for non-mobile workers
2. implement by 1 August 2003 - for sea fishermen: 4 weeks' paid leave, health checks for night workers, adequate rest, maximum hours of work not more than 14 hours in any 24-hour period and 72 hours in any seven-day period; or minimum hours of rest not less than 10 hours in any 24-hour period and 77 hours in any seven-day period

Offshore

1. implement by 1 August 2003 - full provisions for both shore-based non-mobile workers and offshore mobile workers; extended working-week reference period, subject to industry agreement

Junior Doctors

1. full implementation by 1 August 2012; 58-hour week by August 2004; 56-hour week by August 2007

Full details are available at www.dti.gov.uk/er/work_time_regs/exsectors.htm
Payroll Briefing 2 - 20 June 2002

Paid holiday leave

Two recent Employment Appeal Tribunal (EAT) judgements have highlighted some important principles on the paid holiday provisions of the Working Time Regulations 1998 (WTR).

In one judgement covering three separate appeals, the issue was whether employees who had been on long-term sick leave can claim holiday pay. It had been argued, in effect, that holiday leave is leave from work, not leave from sick leave, and that an employee had to be at work in order to accrue entitlement to holidays.

The tribunal ruled that, under the provisions of the WTR,

• there is no pre-condition that a worker must be at work before taking holiday leave, as there is, for example, in the case of rest breaks
• the only pre-condition defined in the Regulations is that a worker must give the appropriate advance notice to the employer to take holiday leave, either that defined in the contract or the defined statutory notice period
• therefore, a worker absent from work on medical grounds may give notice to take paid holiday leave and, on completion of that leave, return to sick leave.

In a separate judgement, an employer appealed against a tribunal decision that payment of holiday pay as a weekly supplement was in breach of the WTR. The employee was paid four weeks holiday pay over the year, but it was paid as 8% of his weekly pay. The EAT agreed with the tribunal, stating that the WTR acted to make void any contractual provision that excludes or limits the effect of the Regulations. Holiday pay must be paid at the time that the holiday is taken, and at the statutorily defined rate, in order for workers to have the necessary funds at the time they need them.

Kigass Aero Components v. Brown (EAT/481/00)
Bold Transmission Parts v. Taree (EAT/1030/00)
Macredie v. Thrapston Garage (EAT/578/01)
MPB Structure Ltd v. Munro (EAT/1257/01)
Payroll Briefing 224 - 23 May 2002

Young workers

Staying with DTI legislation delays, the European Young Workers Directive does not permit young workers, i.e. those under age 18, to work for more than 40 hours in any week or to work at night. The Working Time Regulations, taking advantage of an opt-out negotiated by the Government, permits them to work for 48 hours or more a week, and also to work at night. The opt-out, however, expired on 22 June 2000 and new Regulations have not, after more than a year and half, been introduced to correct the legislation. (See news items in issues 192 and 194 of Payroll Briefing)

Early in 2001, the Government undertook a consultation to ascertain the views of industry on the nature of the replacement regulations for young workers, and that consultation period ended in March 2001. Since then everything has gone quiet.

In response to an enquiry from the author in October 2001 about the legal status of the working week and night work rules for young workers, the DTI made the following statement:

"The Young Workers Directive opt-out did end in June 2000. We have yet to amend the Working Time Regulations (we will be taking this issue forward over the next couple of months) so, unless the employer is an emanation of the state (public sector), he/she should continue to work to the domestic Working Time Regulations."

It has, therefore, been illegal under European law since June 2000 for any young workers in the public sector to work for more than 40 hours in any week, or to work at night.

Following a further enquiry in early January 2002, the DTI's latest statement is as follows:

"We are in the process of submitting proposals for re-consultation on draft legislation to Ministers. We aim to implement the measures as soon as is practicably possible following the end of the consultation period. The European Commission has been kept informed of our progress towards implementation of these provisions."

So it appears that the DTI intends to issue a new consultation document on the working time of young workers and then to proceed to make new Regulations. As a result, it will likely be two years since the UK's opt-out expired before the Government updates the Working Time Regulations. That must be some kind of record. - Payroll Briefing 217 - 4 February 2002

Paid annual leave

Following the decision of the European Court of Justice in the case brought against the UK Government by the Broadcasting Entertainment Cinematograph and Theatre Union (BECTU), that the three-month service qualification for entitlement to paid annual leave discriminates against employees on short-term contracts, the Government has introduced legislation to correct the situation.

The Working Time (Amendment) Regulations 2001 have been made and come into force on 25 October 2001. They implement the provisions of the European Working Time Directive that allow workers to enjoy paid leave as soon as they start in a new employment, rather than having to wait for three months, as originally enacted. The Amendment Regulations insert a new regulation into the Working Time Regulations 1998 (WTR), Regulation 15A, that defines the concept of accrual during the first year of employment.

The text of the new Regulation 15A is poorly worded and its meaning only becomes clear in the light of worked examples given in an "addendum" that has been issued to the DTI's published guidance on the Working Time Regulations and clarification on a number of questions from the DTI press office.

To understand the significance of Regulation 15A, it is important to be clear about the existing rules for determining entitlement to paid annual leave.

Regulation 13 - Leave entitlement
Under the existing provisions of Regulation 13 of the WTR, each worker has a "leave year" which, for most, is the holiday year defined in their terms and conditions of employment. Workers are entitled to 20 days' annual leave in each "leave year". If a worker starts a new job after the start of a leave year, the leave entitlement in that year is a proportion of 20 days based on the period between the worker's start date and the end of the leave year. Regulation 13 does no more than define a worker's entitlement to paid leave in a leave year.

For example, a full-time employee starts a new job on 20 July, part way through the employer's holiday year that runs from 1 April to 31 March. The entitlement for the remaining 255 days of the holiday year is 14 days, i.e. 20 days ÷ 365 × 255, rounded up. The employee is entitled to 14 days paid leave in the holiday year to 31 March.

Regulation 14 - Compensation for holiday not taken on termination
The existing Regulation 14 explains the way in which compensation is paid when a worker leaves the employment with some outstanding holiday entitlement. The holiday pay on termination is worked out by taking a proportion of the annual 20 days' entitlement, based on the length of the period between the start of the leave year and the termination date, and deducting any paid leave already taken in the leave year. The purpose of Regulation 14 is to define entitlement to holiday pay on termination.

To illustrate, if the employee in the above example were to leave on 19 June in the following year, any entitlement to holiday pay on termination would be based on the 80 days between the start of the leave year, 1 April, and the termination date. Assuming that the employee has taken no paid leave in that period, the compensation for untaken leave would be the pay for 4.38 days, i.e. 20 days ÷ 365 × 80, without any rounding.

Regulation 15A - Accrual in the year of employment
The new Regulation 15A introduces an entirely new set of rules governing the rate at which leave entitlement accrues during a worker's first year of employment. The Regulation provides for accrual over "the worker's first year of employment" at the rate of 1/12th of 20 days on "the first day of each month of that year". The result is rounded up to the nearest half-day or whole day.

The expression "first day of each month" does not refer to the beginning of a calendar month, e.g. 1 August, but to each monthly anniversary of the worker's employment since joining. The definition also means that the accrual takes place in advance, so that a worker may take 2 days holiday during the first month of employment (i.e. 20 days ÷ 12 = 1.67, rounded up to 2), and up to 3½ days during the first two months of employment (i.e. 20 days ÷ 12 × 2 = 3.33, rounded up to 3½), and so on.

The purpose of Regulation 15A is only to enable employers to control the rate at which holiday may be taken during a worker's first year of employment. It has no bearing whatsoever on a particular worker's leave entitlement within a leave year, or to the calculation of holiday pay on termination. Continuing the same example, the full-time employee who started the new job on 20 July may take up to 2 days leave between 20 July and 19 August. The maximum number of days that may be taken between 20 July and 19 September is 3½ days, and so on.

Relationship between the three Regulations
If we continue the example to the start of the employee's ninth month on 20 March, we find that the employee has now accrued 15 days (i.e. 20 days ÷ 12 × 9) to be taken between 20 July, the joining date, and 19 April. But, according to the Regulation 13 entitlement calculation, the employee may only take 14 days leave in the leave year ending on 31 March. Is this a contradiction?

Not if the different objectives of Regulation 13 and 15A are understood. Because this is still the employee's first year of employment, the accrual rules of Regulation 15A restrict the rate at which leave may be taken to no more than 15 days by 19 April. The leave entitlement rules of Regulation 13 limit the number of days that may be taken in the leave year that ends on 31 March to 14 days. However, from 1 April, the employee has a renewed entitlement to 20 days to take in the new leave year.

Another decision point arises when the employee leaves on 19 June. The Regulation 14 rules give an entitlement to 4.38 days of compensation for leave not taken at that point. However, the Regulation 15A rules show an accrual entitlement of 18½ days by 19 June. There is no contradiction. Regulation 15A does not provide any entitlement to holiday pay on termination; it states only that the employee may not have taken more than 18½ days in the period from 20 July, the joining date, to 19 June. Compensation for untaken leave on termination is based strictly on entitlement in the current leave year, in our example between 1 April and 19 June.

For the many employers who provide paid leave entitlement that is well in excess of the statutory 20 days and who place no contractual restrictions on when they may take their leave during each holiday year, this new "accrual" Regulation is unlikely to create any problems. However, for smaller employers who provide only the statutory period of annual leave, the rules may appear complex and contradictory. In particular, employers whose contracts of employment place restrictions on when employees may take their holidays during the year, and those who close down completely at different times of the year, should check to ensure that their rules are not more restrictive than the new statutory accrual rules.

Employers who are particularly affected by these rules are those with workers on short-term contracts who, until now, have had no statutory holiday entitlement as long as the contracts were for periods of less than thirteen weeks. They will now need to become familiar with the rules set out in Regulations 13, 14 and 15A, and their interaction. The key points to remember are

• The 20-days annual entitlement relates only to full-time employees; part-time employees have pro-rata entitlement, e.g. 12 days for an
employee working 3 days per week.
• A full-time employee has an accrual entitlement to 2 days leave from the first day of employment. This increases to 3½ days after one
month of employment, and to 5 days after two months of employment. The most paid leave that the employee may take in the first
three months of employment is 5 days.
• There is no automatic right for employee's to take the holiday they have accrued in the year to date; paid leave is still subject to the
employer's contractual holiday booking arrangements or, in the absence of any rules, to the minimum notice rules defined in
Regulation 15 of the WTR.
• If the employee leaves within the first three months of employment, the employer must pay compensation for leave not
taken. However, the number of days accrued has no bearing whatsoever on the calculation of termination holiday pay. It is the
Regulation 14 rules that must be used. For example, an employee engaged for a fixed-term of eight weeks will be entitled to payment
for a minimum of 3.07 days, i.e. 20 days ÷ 365 × 56. The rate at which payment is made may not be less than the rate determined
using the statutory Weeks Pay rules.
• The new accrual rules apply to new employees starting on or after 25 October 2001. The new arrangements are not retrospective.
Payroll Briefing 210 - 11 October 2001

Paid annual leave

On 26 June, the European Court of Justice ruled that the 13-week qualifying period set by the UK's Working Time Regulations is inconsistent with the European Working Time Directive. The case was successfully brought against the British Government by the Broadcasting Entertainment Cinematograph and Theatre Union (BECTU).

The Working Time Regulations currently do not permit workers to take paid leave during their first 13 works in a new job, although they do accrue entitlement during that period. The European Court of Justice ruling extends entitlement to paid leave from the first day of employment. And, if their employment ends within the first 13 weeks, workers will be entitled to payment for the holiday accrued but not taken.

There is to be an immediate period of consultation on how the Regulations should be amended to correct the situation. The consultation document includes a proposal that, in the first year of employment, workers will accrue one twelfth of their annual entitlement each month, rounded to the nearest full day. The effect of this proposal is that a full-time worker would be entitled to up to 2 days paid holiday after one month of employment.

The consultation document is available on the DTI's website, at www.dti.gov.uk/consultations . Responses must be received by 27 July at the latest.

DTI press release P/2001/330 of 26 June 2001. - Payroll Briefing 206 - 19 July 2001