Tribunal Decision on Elms v Balfour Beatty Utilities Solutions Ltd and Holiday Pay Calculations

You may recall that last year in the case of Neal v Freightliner Ltd, the employment tribunal controversially concluded that the calculation of holiday pay should indeed include overtime. In this more recent case of Elms v Balfour Beatty Utilities Solutions Ltd, the tribunal took a different decision. In the latter case, the tribunal found that a worker’s holiday pay should not be calculated with reference to additional factors such as discretionary pay, overtime pay or standby allowances. They concluded that holiday pay should simply be calculated with reference to basic pay.

Background

In the case of Elms vs Balfour Beatty, The employee’s role was that of a general operative for a gas supply contractor. As problems with gas supply could occur at anytime, it was necessary for staff to be available around the clock to ensure cover in the event that problems should arise. Mr Elms’ written statement of terms and conditions of employment stated that his working week was 47.5 hours, on a shift pattern of 7:30am to 5:30pm on Monday to Friday. This also included provision that he may be required to work a reasonable amount of overtime.

In practice, Mr Elms worked a rota of eight days on and four days off. This included weekend shifts and evening shifts, spanning from 4pm until midnight on weekends. This pattern meant that a ‘normal’ working week equated to 40 hours worked, however he was actually paid 47.5 hours, potentially to compensate for the unsociable shifts. Additionally, Mr Elms received a standby allowance for each 4pm to midnight shift, and regularly worked overtime. He also received occasional bonus for completion of specific tasks.

The Claim

Mr Elms claimed in the employment tribunal that his employer made unlawful deductions from his wages contrary to the Employment Rights Act 1996. He argued that they had breached the Working Time Regulations 1998 (SI 1998/1833) and that when calculating holiday pay, the Company should have taken into account his overtime, bonuses and standby allowances, similarly to the case of Williams and others v British Airways plc Case 155/10 ECJ.

Considerations

Despite what was stated in his written statement of terms and conditions, the tribunal accepted that Mr Elms’ “normal hours,” are 40 hours per week, notwithstanding his frequent overtime working. They explained that as Mr Elms was not guaranteed any overtime and there was no fixed overtime that Mr Elms had to work, his holiday pay should only be calculated upon the basic pay of his normal 40 hour working week.

When considering their decision, the tribunal pointed out that according to the Court of Appeal in Bamsey and others v Albon Engineering & Manufacturing plc “normal working hours” are the minimum number of hours that the worker is required to work under his or her contract of employment. This would exclude additional factors such as overtime.

It is however, important to note that neither decision in each case is binding on other tribunals and courts, and it is expected that both cases will be appealed. The Employment Appeal Tribunal would then decide whether or not holiday pay should normally be limited to basic pay, or to include factors such as voluntary overtime, discretionary bonuses and standby allowances as highlighted above. Further, it is useful to remember that Under s.234 of the Employment Rights Act 1996, where the worker’s pay varies from week to week, a “week’s pay” is averaged over a 12-week reference period.