Holiday pay should be based on “normal remuneration”

5 November 2012

The recent case of British Airways plc v Williams & Ors [2012] UKSC 43 has highlighted that an individual’s holiday pay should be based on their “normal remuneration”. Holiday pay should therefore include any supplements to basic salary that are intrinsically linked to the “performance of the tasks which the worker is required to carry out under [their] contract of employment”.

This Supreme Court judgment was made in relation to claims from thousands of British Airways pilots represented by BALPA ­ the British Air Line Pilots Association. During annual leave, the pilots were receiving remuneration encompassing basic fixed pay alone. They argued that they should also be receiving: (i) Flying Pay Supplement; and (ii) Time Away From Base (TAFB) allowance ­ both of which vary according to the time spent flying and are paid on top of basic salary (albeit that the TAFB allowance was said, by some, to also include cover for ancillary costs as well).

The BALPA pilots were successful at Employment Tribunal and Employment Appeal Tribunal level but lost to British Airways at the Court of Appeal. The pilots went on to appeal to the Supreme Court which then referred a number of questions on this topic to the CJEU (formerly the ECJ). The CJEU concluded that the purpose of paid annual leave is ­ in terms of remuneration ­ to put workers in the position they would have been in had they been working. The CJEU’s determination centred on analysis of the Aviation Directive; however, as the Working Time Directive (which applies to workers in other sectors) is broadly based on the same principles it is likely that this decision will apply to all workers.

The Supreme Court has now referred the Williams case back to an Employment Tribunal for determination of exactly what “normal remuneration” should consist of in their circumstances.

It is envisaged that cases may now be brought by those working in other industries to claim higher rates of holiday pay based on the inclusion of supplements intrinsically linked to the performance of a worker’s contractual duties. To pre-empt this employers may wish to assess whether they need to include such supplements in their workers’ holiday pay and be prepared to answer queries.

If you need assistance relating to any of the issues in the above update then please contact our team.