Recalculating holiday entitlement when hours of work change

Subscribe to Business Support news feeds

Published

In Greenfield v the Care Bureau the ECJ look at the issue of recalculating EU holiday entitlement for workers who change their hours part way through the holiday year.

Want downloads, policy templates and guidance on holiday arrangements and pay? Visit our HR and employment law resources page.

data-protection  

Attend our autumn course for HR managers on data protection to ensure you're prepared for the big changes coming in 2018.

 

 

 

Background

Ms Greenfield was employed by Care Bureau. Her working hours and days differed from week to week, and her pay for any week varied according to the number of days or hours she worked.

The holiday year ran from the middle of June. Ms Greenfield took 7 days of paid holiday in July 2012. During the 12-week period immediately before that holiday, her work pattern was just 1 day per week. From August 2012, Ms Greenfield significantly increased her hours in that she began working a pattern of 12 days on and 2 days off.

In November 2012 Ms Greenfield requested a week of paid holiday. Care Bureau informed her that she had exhausted her 5.6 week’s holiday entitlement in July. Since Ms Greenfield had taken her July holiday at a time when her work pattern was one day per week, she had taken the equivalent of 7 weeks of paid holiday, and accordingly exhausted her entitlement.

Later that holiday year, Ms Greenfield left employment. Ms Greenfield brought a claim in the Birmingham Employment Tribunal for unpaid but accrued holiday pay.  She argued that her holiday entitlement for the whole year should have been retroactively recalculated and adjusted following the increase in her working hours, so as to be proportional to her new number of working hours and not the hours worked at the time she took her holiday in July. The Birmingham Employment Tribunal decided to refer the matter to the European Court of Justice (ECJ).

HR-support-box

Find out more about how you can gain access to unlimited phone and email support from a dedicated HR and employment law adviser.

ECJ ruling

The ECJ ruled that, in relation to the 4 week minimum holiday entitlement under the Working Time Directive (‘Euroleave’):

  • the purpose of paid holiday is to enable the worker to rest from carrying out the work they are required to do under their employment contract. Consequently, the entitlement to paid holiday accrues and must be calculated with regard to the work pattern specified in the contract
  • the entitlement to paid holiday must be calculated by reference to the days, hours and/or fractions of days or hours worked and specified in the employment contract
  • EU law does not oblige employers to retroactively recalculate and increase the holiday entitlement which a worker has already accrued if they increase their hours part way through the year
  • EU law does, however, require that employers recalculate and increase the holiday entitlement which accrues from the point in time when the hours increase
  • On termination of employment, workers are entitled to a payment in lieu of accrued but untaken holiday calculated on the same basis as if they had been at work.

Comment

In this case, the ECJ confirms the simple and logical principle that, if a worker changes their hours part way through a holiday year, you increase their holiday entitlement going forward but you do not increase the holidays they have already accrued to date. Technically the ECJ ruling applies only  to Euroleave, but we advise applying it to all holidays.

In a previous case called Tirols the ECJ had already looked at what happens when a worker decreases their hours part way through the year. In Tirols, the ECJ ruled that a reduction in hours part way through the year does not allow the employer to reduce the holiday which the worker has already accrued. The Greenfield case simply confirms that a similar principle applies when the worker increases their hours part way through a holiday year.

In our experience most companies already operate this approach to recalculating holidays when a worker changes hours part way through a year. However, it can cause disappointment or operational problems if the worker has not taken their accrued holidays before changing their hours. For example:

Situation 1:

Suppose a worker works 4 days a week and is entitled to 24 days holiday a year. Exactly half way through the holiday year she increases her hours to 5 days a week. She has not taken any of her 12 days accrued holiday at this point. She will accrue a further 15 days holiday over the rest of the holiday year. The 12 days she has accrued to date do not get recalculated, but they will not “go as far” now; they would have translated into 3 weeks holiday if she had taken them whilst she was working 4 days a week but now they will only translate into 2 weeks and 2 days.

Situation 2:

Suppose a worker works 5 days a week and is entitled to 30 days holiday a year. Exactly half way through the holiday year she decreases her hours to 4 days a week. She has built up 15 days holiday by this point. She will only accrue 12 days holiday for the rest of the holiday year, because her allowance will be reduced to reflect her new hours. However, the company cannot reduce the 15 days she has already accrued, even though it will now go further; it would have translated into 3 weeks when she was working 5 days a week but will now translate into 3 weeks and 3 days.

The second situation can often happen with maternity returners, who may return on different hours with lots of holiday entitlement built up. Sometimes the issues are resolved by the worker agreeing to use up some or all of their accrued holidays before the change in hours takes effect.  

Sometimes the worker has taken more than their accrued holidays before changing hours. What happens in this situation? This is best explained by an example:

Situation 3:

Suppose a worker works 4 days a week and is entitled to 24 days holiday a year. Exactly half way through the holiday year she increases her hours to 5 days a week. She had already accrued 12 days holiday when she changed her hours and will accrue a further 15 days holiday over the rest of the holiday year, resulting in a total holiday entitlement of 27 days for the whole year. Suppose she had taken 17 days holiday when she changes her hours. This means that she has 10 days outstanding holiday to take.

Leaving aside the issue of recalculating holiday entitlement, the Greenfield case also clears up a point about holiday pay on termination.  Recent ECJ caselaw (Williams, Lock) has established that workers are entitled to “normal pay” for Euroleave.  Until now, we have not known for certain if this also applied on termination of employment or if employers could pay something less than “normal pay” on termination.  The Greenfield case confirms what EEF have been advising, i.e. that the same principles apply on termination and that employers should apply their “normal pay” approach to Euroleave on termination as well as to Euroleave during employment.

 

EEF offers advice and guidance packages to give employers and HR mangers instant telephone or email access access to experienced legal advisers and solicitors. Find out which package is right for you.

business-support Take a look at our HR and employment law guidance packages

We offer unlimited support by telephone, online and on-site for any issue, from drawing up contracts to facing an employment tribunal claim.

Read more >
mind-the-gap Gender Pay Gap: What you need to know

Our HR team can help lift the burden of the reporting process, from initial preparation and analysis to practical recommendations on how to reduce your gender pay gap.

Read more >
data-protection Data Protection for HR: how to design and draft your essential documents

The clock is ticking for HR professionals to prepare for a major overhaul to the current data protection regime. Find out how to prepare for the GDPR and avoid potential hazards.

Read more >
Online payments are not supported by your browser. Please choose an alternative browser or make payments through the 'Other payment options' on step 3.