As employees begin to flock in their droves to sunnier climates, it is a good time for us to remind employers of the law relating to annual leave entitlements. In light of the recent PSNI decision in Northern Ireland, discussed further below, employers should be more cognisant than ever of their statutory obligations when it comes to calculating holiday pay.
The Northern Irish Court of Appeal recently ordered that holiday pay for police officers and civilian staff should not be based solely on basic pay but should also include payment for overtime. The Court found that the holiday payments of more than 3,700 PSNI officers and support staff had been incorrectly calculated for a period of 20 years exposing the PSNI to liabilities reported to be in the region of £40m. This decision is not binding on courts in the Republic of Ireland but there is EU case law which has established that, in respect of the four-week period of annual leave granted under the Eurpoean Directive, from which our domestic legislation is derived, "normal remuneration" should be taken into account when calculating holiday pay. The concept of "normal remuneration" will obviously vary from one case to another.
In Ireland, the Organisation of Working Time Act (Determination of Pay for Holidays) Regulations 1997 ("the Regulations"), state that payments in respect of overtime should not be included in any holiday payment calculations. However, employers must be cognisant of the fact that the EU developments referred to above do suggest that this approach is inconsistent with European Law and there is scope for the WRC or Labour Court to disregard national law if it is inconsistent with the EU position. In light of these developments, this article serves as a timely reminder to employers of their statutory obligations to employees in terms of calculating annual leave entitlements and holiday pay.
Annual Leave Entitlements
Section 19 of the Organisation of Working Time Act 1997 ("the 1997 Act") sets out the entitlements of employees in respect of annual leave and provides that an employee is entitled to paid annual leave equal to the greatest of the following options;
four working weeks in a leave year in which the employee has worked at least 1365 hours; one third of a working week of each month in the leave year in which the employee has worked at least 117 hours, or; 8% of the hours the employee works in a leave year (subject to a maximum of four working weeks...