Case update (2): Holiday pay calculations

Summary: Is a worker entitled to have overtime payments and shift premiums counted towards his or her holiday pay? Yes says the Tribunal in Neal v Freightliner Ltd, as long as they are intrinsically linked to the performance of the tasks required under his or her contract of employment.

Facts: Mr Neal was employed by Freightliner Ltd as a Multi-Skilled Operative (MSO) at its Birmingham depot from July 2007. His terms and conditions of employment specified that he worked a basic 35 hours per week, made up of seven-hour shifts. He was required to work overtime when necessary. Mr Neal’s employment was also governed by a local collective agreement which provided for a nine-hour shift pattern. His hours varied day by day in accordance with a weekly roster providing 24-hour cover Monday to Friday and Saturdays until 2pm. Mr Neal’s contract stipulated that he had to work one Saturday in every three.

Any hours in addition to these were said to be voluntary. However, in practice, Mr Neal had never worked a seven-hour shift but worked shifts of largely eight-and-a-half or nine hours, with occasional 12-hour shifts.

The additional ‘voluntary’ hours were not taken into account for the purpose of calculating holiday pay. Mr Neal argued that this was wrong as, in practice, these were the hours he was required to work and he brought a claim for unauthorised deductions from wages and a breach of the Working Time Regulations 1998. Mr Neal relied on the CJEU ruling that the EU Working Time Directive requires that holiday pay must correspond to a worker’s normal remuneration and should take into account payments which are ‘intrinsically linked’ to the performance of the tasks which the worker is required to carry out under his or her contract of employment.

The Tribunal upheld Mr Neal’s claim and concluded that it was quite clear from the CJEU judgment that Mr Neal was entitled to holiday pay that was not based solely on his basic salary. He was entitled to have other components taken into account provided that they were intrinsically linked to the performance of the tasks he was required to carry out under his contract of employment. The work he did as overtime and on weekends all amounted to the performance of tasks that he was required to carry out under his contract of employment. The fact that he may have volunteered to perform those tasks at times outside those that he was contracted to do did not mean that the performance at those times was no longer ‘intrinsically linked’. The same was true of the shift premiums that were attached to some of those additional hours.

Implications: Employers should consider the implications of regular payments of overtime and shift premiums. If you do make these payments to any staff and they can be considered ‘intrinsically linked’ to the performance of the worker’s tasks under their contract, then be warned you should be including these when calculating holiday pay.