Employers must recalculate statutory holiday entitlement when working hours increase

Where an employee increased her working hours during a holiday year, it was necessary to recalculate her statutory holiday entitlement for the balance of the holiday year, but not retrospectively.

Speedread

When a worker increases their hours during a holiday year, their employer must recalculate their statutory holiday entitlement for the balance of the holiday year, based on their increased working hours. However, the employer does not need to recalculate retrospectively any statutory holiday entitlement which has already accrued (and possibly been taken) to reflect increased hours. Any leave already taken in excess of accrued entitlement during a period of part time work must be deducted from the recalculated entitlement for the balance of the year.

Facts

In Greenfield v The Care Bureau Ltd, Ms Greenfield’s holiday year ran from 15 June each year. Her working hours differed from week to week. She took seven days’ holiday in July 2012. At that point, and in the 12 weeks before that, she was working one day a week. This meant that her statutory holiday entitlement for the year was 5.6 days. By taking seven days’ holiday, she therefore took more than her annual statutory holiday entitlement.

From August 2012, Ms Greenfield increased her hours. She began working a pattern of 12 days on, two days off. In November 2012 she requested a week’s leave. Her employer refused as she had already exhausted her entitlement to annual leave in July 2012 (as calculated with reference to the hours she was working in July 2012).

She brought an employment tribunal claim. She argued that her statutory holiday entitlement should be recalculated following an increase in her working hours and that her new working hours should be used to calculate her entitlement for the whole year.

The ECJ ruled that when a worker increases their hours during a holiday year, any statutory holiday entitlement which has already accrued (and possibly been taken) does not need to be recalculated retrospectively to reflect increased hours. However, a new calculation must be performed for the period during which working hours increased. If leave has already been taken in excess of accrued entitlement during a period of part time work, it must be deducted from the recalculated entitlement for the balance of the year.

The ECJ clarified that the situation is exactly if employment has terminated and the employee is seeking to be paid in lieu of accrued but untaken leave. It is for the national court to determine, based on a reference period which it considers representative, the method of calculating the employee’s normal remuneration

Implications

Leave entitlement

Previous ECJ case law already makes it clear that where an employee reduces their hours and moves from full time to part time working, the employer is not permitted to reduce the annual leave entitlement already accrued. The decision in this case confirms that the reverse is also true.

In practice this means that whenever an employee changes their working hours, it is necessary to recalculate their holiday entitlement for the balance of the holiday year. However it is not necessary to recalculate entitlement for the part of the holiday year which has already passed.

If an employee has have taken more than their entitlement for the period before the leave is recalculated, the excess is deducted from the holiday they have left to take for the balance of the year.

Example:

The total statutory holiday entitlement for the year is 24.26 days. If the employee takes 5 days holiday in the first two months, they only have 19.26 left to take in the rest of the year.

Pay

The Working Time Regulations 1998 calculate holiday pay based on pay at the time holiday is taken, rather than when it accrued. There are both winners and losers from this approach. The ECJ’s ruling in this case does not give any guidance on whether this approach is compatible with EU law.