Paying Basic Pay Only During Statutory Annual Leave Unlawful

The Supreme Court has held that British Airways had failed to comply with its obligations under the Civil Aviation (Working Time) Regulations when it paid basic pay only during periods of annual leave. 

This follows the ECJ’s decision last year in British Airways v Williams, where it ruled that “normal remuneration” which employees are entitled to receive during annual leave includes remuneration intrinsically linked to the performance of contractual tasks, but not remuneration intended to cover costs. Flight pay supplements (allowances paid in respect of time spent flying) should therefore have been paid.  The Supreme Court remitted the case to the tribunal to determine the extent to which a time away from base allowance represented out of pocket expenses (and therefore not payable during annual leave).

The decision is likely to apply equally to claims for holiday under the Working Time Regulations 1998 (WTR) and employers need to be aware of this when calculating holiday pay, particularly where they pay allowances on top of basic pay.  The UK provisions are inconsistent with the ECJ ruling as, for example, certain commission payments, overtime and discretionary bonuses are excluded from the calculation of a week’s pay but are likely to form part of an employee’s “normal remuneration” as they are intrinsically linked to the performance of contractual tasks.  Public sector workers can rely directly on the Directive to enforce their rights but private sector workers will have to argue for a purposive construction of the UK provisions in order to enforce their rights.