Calculating How Much You Are Owed for Untaken Holiday
In Connor v Chief Constable of South Yorkshire Police, the Employment Appeal Tribunal had to determine the payment an employee was owed in lieu of an untaken holiday, following the end of his employment.
The contract of employment that Mr. Connor had signed stated that on termination, any holiday he’d accrued but hadn’t taken would be paid at a rate of 1/365. This calculation method meant that his holiday pay was lower than the amount he’d received during his employment which mirrored the ‘week’s pay’ provisions in the Employment Rights Act 1996.
He claimed that he had been underpaid and he brought unlawful deductions from the wages claim. Mr. Connor’s employers, on the other hand, claimed that Mr. Connor was entitled to this rate due to his employment contract being a ‘relevant agreement’, and this meant that they were allowed to agree different methods of calculation on termination. The tribunal held that the contractual terms complied with Regulation 14 and that the correct deduction was 1/365 for each day’s leave Mr Connor was owed. He appealed to the Employment Appeals Tribunal.
The employers’ response to this was to argue that paying a lower rate on termination was allowed, provided that there was a relevant agreement in place with the employee. It also referenced the Supreme Court’s decision in Hartley v King Edward IV College (which applied to deductions made for teachers on strike) which found that 1/365 was the appropriate rate and, it said, that principle applied to all contracts which involved the payment of a salary.
The EAT agreed that Mr Connor had been underpaid. Finally, the EAT declared that in general, any payment made in lieu of untaken holidays which came to a total lower than an employee should receive during employment did not comply with the Working Time Regulations. In other words, an employee has to receive the same daily rate for holiday irrespective of whether they take it during employment or receive it as a payment in lieu once their employment ends.