NHS Trust Faces Setback in Holiday Pay Calculation Appeal

10 Jan 2025Court Report

The Employment Appeal Tribunal dismissed East Lancashire NHS Trust's appeal on holiday pay calculation methodology

Introduction

The Employment Appeal Tribunal (EAT) recently ruled on a significant case involving the East Lancashire NHS Trust and its employee, Imran Akram, concerning the calculation of holiday pay. The appeal, brought by the NHS Trust, challenged the Employment Tribunal's (ET) decision regarding the method used for calculating holiday pay, specifically the divisor applied to determine daily rates.

Background

Imran Akram, employed as a Phlebotomist since 2013, had a contract under the NHS's Agenda for Change, which included provisions for calculating annual leave based on worked hours. His work schedule varied weekly, affecting his pay due to different shift durations and enhancements for unsocial hours.

Grounds of Appeal

The NHS Trust raised two primary grounds of appeal. Firstly, they argued that the ET erred by using working days instead of calendar days as the divisor for calculating holiday pay. Secondly, they contended that the ET improperly relied on section 222 of the Employment Rights Act 1996 (ERA 1996) to determine the divisor, which they argued was irrelevant to calculating a day's pay.

Employment Tribunal's Findings

The ET had previously ruled that Akram's holiday pay should be calculated based on working days per year, aligning with the principle that holiday pay should reflect what an employee would earn if working. However, the ET noted a lack of evidence to determine the exact amount owed, postponing the decision on remedy.

Arguments Presented

The NHS Trust argued that the calculation should mirror the method used to determine holiday entitlement, suggesting a calendar year divisor was appropriate. They claimed Akram's contractual obligation to work any day of the week justified this approach. Conversely, Akram's counsel argued that his actual work pattern, not contractual obligations, should dictate the divisor, supporting the ET's working days approach.

Legal Framework

The case hinged on the interpretation of the Working Time Regulations and sections of the ERA 1996. Regulation 16 of the Working Time Regulations mandates that holiday pay should equate to a week's pay, with sections 221 to 224 of the ERA 1996 providing the framework for calculating this amount.

Tribunal's Decision

Judge Beard dismissed the appeal, deeming it premature as the ET had not finalized the multiplicand for calculating the holiday pay. The EAT emphasized that holiday pay calculations should ensure employees receive no less than their regular earnings during work periods, aligning with both UK and EU jurisprudence.

Conclusion

This case underscores the complexities involved in calculating holiday pay, particularly for employees with irregular work patterns. The decision reinforces the necessity for employers to adhere to statutory guidelines and established legal principles when determining holiday pay, ensuring fairness and compliance with the Working Time Regulations.