1. Introduction
Section 23 of the Organisation of Working Time Act 1997 provides for payment in lieu of accrued but untaken annual leave on cessation of employment. The calculation must reflect the worker’s normal remuneration and the full period of accrual.
In Cuffe v St Vincent’s University Hospital the WRC awarded €2,627 for unpaid annual leave on cessation and clarified the methodology for calculating the entitlement. This article considers the decision and the wider rules on termination payments under the 1997 Act.
2. Legislation and Case Law
Section 23(1) of the Organisation of Working Time Act 1997 provides that where employment ceases, the employee is entitled to compensation for any annual leave that has accrued under Section 19 but has not been taken.
Section 23(3) requires that the calculation of the compensation be in accordance with the regulations on the calculation of holiday pay, namely the Organisation of Working Time (Determination of Pay for Holidays) Regulations 1997.
The Court of Justice in King v Sash Window Workshop C-214/16 held that a worker incorrectly classified as self-employed and denied paid leave was entitled to be paid in lieu on termination for the entire period of accrual, without temporal limit.
Section 27 of the 1997 Act confers jurisdiction on the WRC and provides for compensation that the WRC considers just and equitable, having regard to all of the circumstances, up to two years’ remuneration.
3. Decision
The WRC examined the complainant’s annual leave accrual and the calculation of the cessation payment. It found that the employer had not included all components of normal remuneration in the calculation and that a shortfall existed.
Compensation of €2,627 was awarded to reflect the unpaid cessation payment together with an additional element for the breach.
The decision reinforces the requirement that cessation payments under Section 23 follow the same methodology as ongoing holiday pay calculations, with all components of normal remuneration included.
4. Takeaway
Employers should incorporate the Section 23 cessation calculation into their standard termination process and document the methodology applied. Where shift premiums, commission or other regular allowances are paid, these should be included in the calculation.
Employees should review their final pay against the contractual and statutory leave entitlements. Particular care is required where leave has accrued over an extended period or where the employee was on long-term sick leave at the time of termination.
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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