How do you calculate holiday pay when workers change their hours?
In the case of Greenfield v The Care Bureau Limited, the Employment Tribunal (ET) requested a preliminary ruling from the Court of Justice of the European Union (CJEU) on the following points:
- In circumstances where an employee increases the hours they work, must the amount of leave already accumulated be adjusted proportionally to the new working hours so that the employee's annual leave entitlement to accrued leave is recalculated in accordance with the increase in hours worked?
- Is a different approach required when calculating an employee's payment in lieu of annual leave entitlement upon termination and when calculating an employee's remaining annual leave entitlement when they remain employed?
The matter arose after Ms Greenfield ceased working for Care Bureau Limited in May 2013. She had worked under a contract of employment which stipulated that her working hours and days differed from week to week. The annual leave entitlement for a full-time worker was 5.6 weeks per year and her entitlement to paid leave was calculated at the date on which leave was taken, based on her working pattern for the 12-week period prior to that date.
In July 2012, Ms Greenfield had taken seven days of paid leave. During the 12-week period immediately preceding that holiday, her work pattern had been one day per week. From August 2012, she began working a pattern of 12 days on and two days off, which amounted to an average of 41.4 hours of work per week. When, in November 2012, she requested a week of paid leave, Care Bureau informed her that, as she had already taken the equivalent of seven weeks' paid leave, she had already exhausted her annual leave entitlement.
Ms Greenfield brought a claim for payment of accrued annual leave not taken on the ground that leave already accrued and taken should be retroactively recalculated and adjusted following an increase in working hours – for example, following a move from part-time to full-time work – so as to be proportional to the new number of working hours and not the hours worked at the time leave was taken.
ET and CJEU decisions
Initially, the ET upheld her claim. Care Bureau appealed against the decision but also applied to the ET to reconsider its judgment. The ET decided to stay proceedings and seek the opinion of the CJEU.
The CJEU held that the annual leave entitlement must be calculated by reference to the days, hours and/or fractions of days or hours worked and specified in the contract of employment. The judgment in Zentralbetriebsrat der Landeskrankenhäuser Tirols established that the taking of annual leave in a period after the period during which the entitlement to leave has been accumulated has no connection to the hours worked during the later period. A reduction in working hours when an employee moves from full-time to part-time employment cannot reduce the annual leave entitlement built up during the period of full-time employment. It is therefore necessary to distinguish between periods when the employee worked according to different work patterns and to calculate the annual leave that is appropriate to each.
Therefore, in the event of an increase in the number of hours worked, the employer is not obliged to recalculate retroactively the employee's annual leave entitlement. However, a new calculation must be performed for the period during which the hours worked increased.
The case reaches what is, ostensibly, a logical decision, in that if an employee moves from part-time to full-time employment, the calculation would be based firstly on the period of part-time employment and any difference between holiday entitlement and holiday taken carried forward to the period of full-time employment.
The CJEU also found that the calculation of entitlement to paid annual leave should be performed in the same way when determining the payment in lieu of untaken leave at the end of the employment relationship as when calculating the outstanding leave entitlement where the employment relationship is ongoing.