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The London Employment Appeal Tribunal (EAT), in a decision in the case Manpower UK v Vjestica given on 18 October 2005, upheld a decision by an employment tribunal chairman that, in the context of calculating "a week's pay", the term "earnings" can include payments of holiday pay.
The Working Time Regulations 1998 (WTR) require that holiday pay be paid as not less than the rate of "a week's pay", as defined in the Employment Rights Act 1996 (ERA).
The contract between Mr. Vjestica and Manpower UK was a "zero hours" contract and, as Mr. Vjestica therefore had no "normal hours", he was entitled to have the calculation of his holiday pay based on his "earnings" in the 12 weeks prior to the holiday. This arrangement was set out in Mr. Vjestica's terms and conditions, although the term "earnings" was not defined.
When calculating the average earnings in the 12 weeks, the employer always excluded any holiday pay that had been paid during that period. Mr. Vjestica claimed that, by so doing, he experienced an unlawful deduction in his wages and the employment tribunal chairman, sitting alone, upheld his complaint.
Rejecting the argument that, if holiday pay is included in the calculation, the employee would receive a double benefit, i.e. holiday pay on holiday pay, the EAT decided that the tribunal chairman had been entitled to construe "earnings" as including holiday, particularly because the employer included any payments of statutory maternity, paternity, adoption and sick pay in the 12-week period when calculating the average.
It must be noted that this EAT decision is directly relevant only to this particular case, where "earnings" was a contractual term. The term "earnings" is not used in the statutory definition of "a week's pay" in the ERA; the term "remuneration" is used instead. Unfortunately, the term "remuneration" is also not defined in the legislation, so it is not clear whether or not payments of holiday pay during the 12 weeks are "remuneration". The EAT did not rule on that question, pointing out only that, if the employer had used the term "remuneration" instead of "earnings" in the contract and then specifically excluded holiday pay from the calculation, the employer may have "fallen foul" of the requirement to pay "a week's pay".
...back to 10 November 2005
Sources:
Employment Appeal Tribunal
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For Payroll and Human Resource Professionals
