24/06/2022

The calculation of Holiday Pay has been a live issue for several years and more so since the Northern Ireland Court of Appeal (NICA) handed down its judgment in Chief Constable of the Police Service of Northern Ireland and another v Agnew and others [2019] NICA 32 on 17 June 2019.

From 2011 onwards, a range of cases in both the European and UK courts overhauled the previously settled position of how holiday pay was calculated, with employers now required to include a variety of additional components where employees did not have ‘normal’ remuneration. The UK case of Bear Scotland [2014] also established the principle that underpaid holiday pay cannot be claimed as the last in a series of deductions where more than three months has elapsed between deductions, thus limiting the potential for years of backdated holiday pay claims.

However, in 2019 the NICA  in Agnew found that a 3-month gap between payments does not necessarily break a chain of deductions and as Northern Ireland does not have the 2 years back stop in place in Great Britain (which limits wages claims to a maximum of 2 years) this ruling potentially opened the flood gates for years of underpaid holiday pay, potentially going back to 1996 when EC Working Time Directive was first implemented.

The Court of Appeal also upheld the concept, which first originated in the judgement of the Industrial Tribunal,  of the ‘composite whole, it being the theory that each day of holiday consists of fraction or percentage of:

• % Working Time Directive leave (20 days);
• % Working Time Regulations leave (8 days) and;
• % Any additional contractual leave (x Days)

 Agnew was appealed to the UK Supreme Court (UKSC) where it was initially listed for Hearing in June 2021. The case, however, was subsequently removed from the list at the request of the parties, to allow for settlement discussions to take place, facilitated by retired NICA judge, Sir Paul Girvan QC.

Whilst mediation meetings were held in March 2022, the Police Federation (who are supporting the employees claims) announced that the PSNI did not receive required authorisation from Department of Finance to approve settlement figures.

So, Agnew has now returned to the UKSC where it is relisted for Hearing on 14 and 15 December 2022.

There are thousands of holiday pay cases stayed in Northern Ireland Industrial Tribunals pending the outcome of the Supreme Court decision. The UKSC Judgement is also pending in another holiday pay case of Harper Trust v Brazel which they heard in November 2021.That case deals with the issue of how to calculate holiday pay correctly for atypical working patterns such as term time workers. The effect of all this is that the focus will remain on holiday pay for some time yet.

If your Organisation has not yet done so, you should complete an audit of how you pay holiday to ensure the Organisation is compliant as incorrect calculations could prove costly.