1. Introduction
The calculation of holiday pay has been the subject of extensive litigation in both Ireland and the Court of Justice. Holiday pay must reflect the worker’s normal remuneration, including components such as overtime and shift premiums that are intrinsically linked to the performance of the worker’s tasks.
In Stefan v The Mater Misericordiae University Hospital the Labour Court applied recent European case law to determine the appropriate calculation methodology for a worker whose remuneration included regular shift premiums. This article considers the decision and its implications for employers operating shift-based pay structures.
2. Legislation and Case Law
Section 20 of the Organisation of Working Time Act 1997 provides that an employee on annual leave shall be paid in advance at the normal weekly rate, with the rate calculated in accordance with regulations made by the Minister.
The Organisation of Working Time (Determination of Pay for Holidays) Regulations 1997 (S.I. 475 of 1997) provide that the rate is to be calculated as the average over the 13 weeks preceding the leave, including basic pay and regular allowances.
The Court of Justice in British Airways plc v Williams C-155/10 held that holiday pay must include all components of normal remuneration that are intrinsically linked to the performance of the worker’s tasks.
In Lock v British Gas C-539/12, the Court of Justice extended the principle to commission, holding that a worker on holiday must not suffer a financial disadvantage that might deter the worker from exercising the right to leave.
3. Decision
The Labour Court found that shift premiums that the complainant regularly received during the reference period were intrinsically linked to the performance of his work and should be included in the calculation of holiday pay.
The Court applied the principles in Williams and Lock to hold that the inclusion of regular and predictable remuneration components in holiday pay is necessary to give effect to the right to paid annual leave.
The decision required the employer to recalculate holiday pay for the complainant and (by implication) for similarly situated employees. The award reflected the underpayment over the cognisable period..
4. Takeaway
Employers operating shift-based or commission-based pay structures should review their holiday pay calculation methodology to ensure that all regular components of remuneration are included.
Employees should examine their holiday pay calculation against their actual normal remuneration. Where the calculation excludes regular shift premiums, commissions or overtime, a complaint under Section 5 of the Payment of Wages Act 1991 or Section 27 of the 1997 Act may be appropriate.
5. Further information
This article was prepared for informational purposes only. For further advice, please email enquiries@crushell.ie or contact the offices of Crushell & Co Solicitors.
6. About Crushell & Co
Crushell & Co is a specialist law firm focused on protecting and advancing the rights of employees in Ireland. We offer a nationwide service, advising individuals on a wide range of legal and regulatory issues arising at work, including employment law, employment immigration and workplace accidents and injuries.
We help employees understand their position and options by translating complex legal issues into clear, practical advice. Our approach is tailored to each client, ensuring that our strategy is aligned with their personal and professional circumstances.
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