Holiday calculations- at first glance they can appear straightforward, but as any HR or payroll professional can attest, the intricacies of working out different shift and pay patterns can cause an almighty headache.
The European Court of Justice (ECJ) has recently considered whether entitlement to annual leave already accrued has to be recalculated when a part-time worker increases their hours. The question before the Court in Greenfield v The Care Bureau Ltd was whether holidays should be calculated according to the new shift pattern retrospectively, or if the entitlement just has to be calculated going forward.
Ms Greenfield had been employed as a care worker between June 2009 and May 2013. Her leave year started on the 15th of June each year and her contract stated that her hours and pay would vary from week to week. In July 2012 she took 7 days’ paid leave. In the 12 weeks before her holiday, Ms Greenfield worked 1 day per week and therefore, the leave taken at this time amounted to seven weeks’ leave, which exceeded her 5.6 weeks’ entitlement (the standard requirement under the Working Time Regulations).
From August 2012 her working pattern changed to 12 days on and two days off. In November 2012, she requested a week of paid leave. Her employer refused her request claiming she had used up her entitlement to paid annual leave in July 2012. The entitlement to paid leave was calculated at the date on which leave was given, based on the working pattern for the 12-week period prior to the leave. This meant that the leave she had taken at that time equated to seven weeks’ leave which exceeded her 5.6 weeks’ leave entitlement.
Ms Greenfield contended that national law, read in line with EU law, mandated that leave already accrued and taken should be retrospectively recalculated and adjusted following an increase in working hours; basically, the new working hours should be used to calculate the leave entitlement that had already accrued, even if that leave had already been taken.
The ECJ rejected Ms Greenfield’s argument stating that the employer was correct to calculate her leave at the time it was taken. It held that, as the reason for annual leave is to allow the worker rest from work required under the contract, the accrual of leave must be calculated with regard to the work pattern undertaken by the employee at the relevant time- in essence looking at a freeze-frame of the work pattern at the time in question. Her employer did not have to go back and recalculate the leave for the first part of the leave year to reflect the hours worked in the second half.
The Court went onto clarify that an Employer has to recalculate annual leave entitlement going forward only once the employee’s hours have increased. In Ms Greenfield’s case, the number of days leave she was entitled to (and therefore potentially the pay on termination) needed to be recalculated for the part of the holiday year in which she had worked increased hours.
Any holiday she had taken under her previous working pattern which exceeded her right to paid annual leave at that time, could be deducted from the ‘new’ rights accumulated in the period in which she worked increased hours.
The ECJ clarified that the situation would be the same whether the individual is currently employed and is seeking to take paid annual leave, or if employment had been terminated and the individual was looking to be paid for any accrued untaken leave.
Whilst this judgment provides clarity where there are limited and clear changes in a worker’s working time during the leave year, it does mean that employers will need to perform complicated calculations of entitlement to paid holiday pay when a worker changes their hours part-way through a year.
Total leave entitlement at the end of the leave year must reflect the full hours or days worked throughout the year, which in turn can only be known when the leave year finishes. Indeed this judgment may mean that the UK approach of using a twelve week reference period immediately before the leave to calculate entitlement for that week of leave, is not consistent with European law, although this will need to be determined by subsequent case-law.
Given the complexity of this area of the law, it would be a good idea to get in touch with your Legal Manager if you are embroiled in these calculations!