Holiday pay and “normal hours”

I work a 12-hour shift but my company only wants to pay me for 9.5 hours for my holiday pay. Is this allowed?

The amount of holiday to which a worker is entitled is defined by the Working Time Regulations 1998. The pay for the statutory holidays is defined by the Employment Rights Act 1996 (ERA 1996). Therefore this is not a simple question to answer.

At the moment all employees and workers are entitled to four weeks statutory holiday per annum. (Part-timers are entitled to the same amount pro-rata) From 1st October 2007 the entitlement will increase to 4.8 weeks and to 5.6 weeks from 1st April 2009. (There is a cap at 28 days maximum for England. There will be no right to take the bank holidays and these (eight in England) can count towards the 28 total.)

The ERA 1996 sets out the calculation of holiday pay in two key paragraphs. One deals with those personnel who have “normal hours” and the other with those who don’t. And herein lies the problem – What is “normal”?

If someone has a contract of employment which states “your normal hours of work are 40 per week” then their normal hours are 40 and their statutory holiday pay would be 40 hours pay.

Where someone works irregular hours, with no “normal hours” defined in their contract then the employer is required to go back over the last 12 weeks (prior to the leave) during which the employee received remuneration and calculate the weekly average. This becomes a week’s pay for the purpose of holiday pay entitlement.

Where the confusion tends to arise is where someone has a normal week, i.e. 40 hours as per the first example above, but where they work overtime, whether on an irregular or regular basis. Employers and employees often think this means that by working overtime/no overtime they do not have “normal hours” and therefore the holiday pay should be averaged over the previous 12 weeks. Not so.

They still have, and are governed by, the normal hour’s paragraph in the ERA 1996. Overtime is ignored. This is true even if the overtime is compulsory. However if the overtime was compulsory and guaranteed then the overtime would be added to the normal hours to produce a higher rate of holiday pay- but only if the overtime is guaranteed.

In answer to the question therefore, if the contract is for “normal hours” of 9.5 hours with 2.5 hours of overtime, statutory holiday pay would be for 9.5 hours – even if the overtime is compulsory. However, as described above, if the overtime is compulsory and guaranteed then your entitlement to holiday pay would be at the 12 hour rate. As your question does not indicate the contractual details I can only answer “Yes it is fair,” or, “No it is not fair,” but I hope the explanation will enable you to know which property applies to you.

Related: How a Supreme Court ruling on holiday pay could affect your business

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Peter Done

Peter is the founder and group managing director of Peninsula Business Services, established in 1983.

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