You are in: Home Page | About Thompsons | Publications | LELR Issue 56

Issue 56 (March 2001)

Contents

Part-timers win at last
There will be another one along in a moment
Calculating holiday pay
Sex, race and equality
Experiences of political discrimination
Lord Chancellor scrapes home

Calculating holiday pay

Taylor v East Midlands Offenders Employment Consortium [2000] IRLR 760

The need to calculate holiday pay due on termination of employment has become more frequent since the implementation of the Working Time Regulations 1998. Regulation 14 gives a worker a statutory entitlement to be paid in lieu of annual leave on termination of employment. The regulations also set out how such a payment is to be calculated.

Mr Taylor was employed full time, he worked a five day week and received an annual salary paid monthly in arrears. His contract of employment entitled him to 20 days annual leave in addition to bank holidays. Mr Taylor's employment terminated and he still had 10 days leave outstanding. He and his employers disagreed as to how the outstanding holiday should be calculated.

Mr Taylor said that his monthly or annual salary should be divided by the number of working days and he should receive that rate for the days due to him. The employers divided his annual salary by 12 to give his gross monthly salary, divided that by the number of calendar days in the month of termination to give a day's pay and multiplied that by 10.

The Employment Tribunal Chairman concluded that the employer's calculation was correct. The EAT said that was wrong and that the Tribunal should have "grossed up" the entitlement to 10 days holiday based on two working weeks to 14 calendar days to take into account the two weekends. The contract of employment was not suspended between Friday and Monday although the obligation to work did not arise. The amounts should be grossed up to a seven day week and they referred in particular to the calculation of holiday pay in Regulation 16 in The Working Time Regulations and a week's pay under the Employment Rights Act. They also disapproved of a method of calculation which varied with the length of a particular calendar month.

The EAT decide that the correct way of calculating holiday pay due to an applicant on termination of employment where 10 days holiday was owed is to divide gross annual salary by 365 to give a day's pay and then to multiply that by 14. In this case increasing the amount of money owed to the Applicant by £200. This case is of considerable assistance to those calculating amounts due on termination and shows the financial significance of getting the calculation right.