CCPS Holiday pay and sleepoversDecember 2014

Holiday payDonald Mackinnon, Director of Legal Services

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Plan of action

1. Components of annual leave

2. General principles regarding traditional calculation of holiday pay

3. Summary of recent cases on holiday pay

4. Up to date position regarding payment of holiday pay going forward

5. Tackling potential historic liability

6. Other issues

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Components of annual leave

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General principles regarding traditional calculation of holiday pay

Normal working hours

No normal working hours

Amount payable under contract of

employment

Average pay over previous 12 weeks

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Holiday pay case law

British Airways v Williams•Pilots’ supplementary payments?

Lock v British Gas•Commission?

Wood and others v Hertel (UK) Ltd and Another; Fulton & Another v Bear Scotland•Regular overtime?

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Up to date position regarding payment of holiday pay going forward

Question: What types of employee are likely to be affected?

Answer: Those who earn additional sums that are “intrinsically linked” to their job, including those who:•Earn regular commission•Work regular paid overtime•Receive regular allowances•Whose actual hours of work are more than those stated in their contract of employment

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Question: To what holidays do the new principles apply?

Answer: Only to the 4 weeks under the Working Time Directive

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Grey areas…

How regular/frequent do the payments have

to be?

How regular/frequent do the payments have

to be?

If payments fluctuate, over what period should they be

averaged?

If payments fluctuate, over what period should they be

averaged?

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What should employers do now?

Carry out an assessment to see if their employees are affectedCarry out an assessment to see if their employees are affected

If answer is “yes” consider changing holiday pay practices going forward (from now, 1 January or start of next holiday year?)

If answer is “yes” consider changing holiday pay practices going forward (from now, 1 January or start of next holiday year?)

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Tackling potential historic liability

Key findings from Wood and others v Hertel (UK) Ltd and Another; Fulton & Another v Bear Scotland:•Claims must be raised within 3 months of underpayment•If gap of 3 months or more between 2 underpayments “chain is broken” and claim in respect of earlier underpayment is time-barred•First 4 weeks leave in each leave year are deemed to be WTD holidays

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Are the cases likely to be appealed?

Finding in relation to position going forward

Unlikely to change

Finding in relation to historic liability

More likely to be overturned

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Other issues

Approach to communication with

trade unions/employees

Approach to communication with

trade unions/employees

Do Local Authorities have any

responsibility for your liability?

Do Local Authorities have any

responsibility for your liability?

What is position in respect of employees who TUPE’d into your

organisation

What is position in respect of employees who TUPE’d into your

organisation

Questions and discussion

SleepoversGerry O’Hare, Senior Legal Manager

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Plan of action

1. Summary of relevant principles in relation to NMW

2. Determining compliance with NMW

3. Case law on treatment of sleepovers for NWM purposes

4. Ensuring compliance going forward

5. Tackling potential historic liability

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Summary of relevant principles in relation to NMW

• Specified minimum hourly rate to which most workers are entitled

• Different rates for different categories of worker

• All employers obliged to pay NMW irrespective of size

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Determining compliance with NMW

Whether worker has received NMW will depend on their average hourly rate

Total remuneration earned in relevant pay reference period

Total number of hours worked in relevant pay reference period

Steps 1 & 2

Steps 1 & 2

Steps 3 & 4

Steps 3 & 4

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Step 1 – identify pay reference period

Pay reference period – one month or shorter if employee is paid more frequently

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Step 2 – calculate remuneration

Total remuneration – gross pay before deductions for income tax and NI less payments and deductions that reduce the NMW.

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Step 3 – calculate hours worked

Number of hours worked is calculated differently depending on type of work done by worker

Time workTime work

Output work

Output work

Un-measured

work

Un-measured

work

Salaried hours work

Salaried hours work

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Step 4 – understand what is “working time”

Consists of time that the worker is:•Actually working•Available at or near a place of work for the purposes of doing time work and required to be available for such work•Travelling on business during normal working hours•Attending training during normal working hours, either at work or elsewhere

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“Available at or near a place of work…”

….for the purpose of doing time work and required to be available for such work, subject to certain exceptions including the following:

“In relation to a worker who sleeps by arrangement at or near a place of work and is provided with suitable facilities for sleeping, time during the hours they are permitted to use those facilities for the purposes of sleeping shall only be treated as being time work when the worker is awake for the purpose of working”

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How are sleepovers treated for NMW purposes?

Are sleepovers time spent “actually working” or time spent “available at or near a place of work for the purpose of doing time work and required to be available for such work”?

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Sleepover case law

• Whittlestone v BJP Home Support Ltd• Esparon t/a Middle West Residential Care

Home v Slavikovska• South Manchester Abbeyfield Society Ltd v

Hopkins & Another• City of Edinburgh v Lauder & Others

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Potential consequences of failure to comply with NMW

• NMW is enforced by HMRC• Civil enforcement – notice of underpayment• Criminal enforcement• Name and shame • Enforcement by worker by way of unlawful

deduction of wages claim or breach of contract claim

• Could a finding of this nature jeopardise winning future public sector contracts?

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Ensuring compliance going forward

• First, ask yourself whether sleepovers are absolutely necessary?

• Could care workers be on-call from their homes as opposed to at place of work?

• Could you have waking night shift workers located centrally who respond to emergencies at different locations (perhaps sharing the cost with other service providers)?

• Any changes to this effect will no doubt involve re-negotiation with client

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If sleepovers are absolutely necessary, consider…• Adjusting rates of pay to ensure compliance with NMW

(perhaps accompanied by cost saving measures like a pay freeze)

• Ensuring mix of “normal shifts” and sleepovers results in average rate of pay exceeding NMW

• Decreasing length of sleepovers and increasing length of normal shifts to increase average hourly rate of pay

• Complete re-negotiation of terms and conditions• Seeking to re-negotiate payment terms with client

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Tackling potential historic liability

Questions and discussion