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Holiday Pay Must Include All Elements Of Remuneration

The Supreme Court has handed down its judgment in respect of how much pilots should be paid as holiday pay. This decision has implications not just for pilots, but also workers generally whose remuneration is made up of various components, for example compulsory overtime, commission and bonuses.

The pilots brought claims, arguing that they were entitled to be paid their normal remuneration during their statutory annual leave. The pilots pay generally involved three components: (i) their basic pay; (ii) their flying pay supplement; and (iii) a time away from base supplement. The employer claimed it was sufficient that they were paid their basic pay. The Supreme Court, having referred the matter to the European Court of Justice, held that pay during annual leave under the Working Time Directive must include all elements of remuneration. Only sums which are “intended exclusively to cover occasional or ancillary costs” (such as expenses) could be excluded. The normal remuneration, if necessary, could be calculated on the basis of an average over a representative period.

Therefore, under this ruling, workers are entitled to their normal remuneration during their holiday – but subject to the following important qualification. It is important to note that this dealt with entitlement to holiday under the Working Time Directive only. The Directive provides that workers are entitled to 4 weeks’ paid holiday each year. The UK has implemented the Directive under the Working Time Regulations 1998, under which workers are entitled to 5.6 weeks’ paid holiday. It would appear that the ruling of this case is only applicable in respect of the 4 weeks’ paid holiday workers are entitled to under European law.