Author: Caroline Philipps
This article was published in www.screentrademagazine.com / September 2017 / screentrade
The question of how to calculate holiday pay has been perplexing employers and their legal advisers since 2014, when a case brought by a British Gas worker upset the status quo. The worker in question, Mr Lock, received results-based commission in addition to his basic salary. However, when he was on holiday, Mr Lock was ‘paid basic salary only’, which inevitably left him financially worse off after a period of annual leave.
The Employment Tribunal determined that results-based commission should be included in the pay that Mr Lock received when on holiday. A key factor behind the decision was the finding that the relevant holiday legislation was intended to safeguard a worker’s right to paid periods of rest as an important principle of social law and as a health and safety measure. Workers should not be disincentivised from taking annual leave and it was reasoned that a dip in income would have the effect of discouraging workers from taking time off.
So, whilst commission-based roles may not be common in the cinema exhibition industry, workers do receive other variable rates of pay. For example overtime may be paid to help resource the seasonal flux in attendance numbers or cover last minute difficulties with the availability of casual workers. Bonuses may also be awarded, for example Christmas or year-end bonuses if a cinema has performed particularly well. The Lock decision led to many questions about how to calculate a week’s pay for workers’ holiday pay, if their pay included variable payments like these.
A decision was handed down from the Employment Appeal Tribunal in the Lock case earlier this year and, whilst it falls short of providing the complete answer, it does give us a steer on what to consider when calculating holiday pay. Helpfully the case reaffirmed that payments which are directly linked to the work a worker is required to carry out and which amount to their “normal pay” should be included in holiday pay. The key factors in calculating holiday pay include:
Overtime payments: Where a worker is obliged to work overtime if requested, (whether or not that overtime is guaranteed), those overtime payments should be included in holiday pay. The position regarding voluntary overtime remains less clear.
Regular commission payments: Results-based commission payments, which are intrinsically linked to the performance of the worker’s task under their contract, should be included in holiday pay. So, for example, if cinema workers are awarded commission each time they sell a membership promotion, those commission payments should be included.
Bonus payments: Awarded quarterly or annually, based upon longterm results, and generated by a large team of workers, are unlikely to count towards holiday payment – similarly annual bonus awards are unlikely to be included.
Irregular working hours: If there is no regular pattern of work, as is commonly the case for shift workers in the cinema industry, their normal remuneration for the purposes of calculating holiday pay should be calculated over an appropriate reference period. Whilst the Tribunal has not specified a particular reference period, we would recommend not less than 12 weeks.
If your cinema engages workers or employees who receive variable pay, it is worth considering whether those payments should be included in holiday pay calculations. Calculating holiday pay is a tricky and developing area of law, so if you are unsure what needs to be included, we recommend you take legal advice, to help to avoid liability accruing for outstanding sums across a large workforce.
Caroline Philipps, Associate, Fladgate LLP (firstname.lastname@example.org)