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The EU Court interprets the meaning of holiday pay

November 2011 - Employment. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

More articles by this firm.

Holiday
Employees’ holiday pay should correspond to their 'normal remuneration'. Where their remuneration is composed of basic pay and allowances, employees are not necessarily entitled to all such allowances on top of their basic pay.
Under the Working Time Directive, all employees are entitled to at least 4 weeks of paid annual leave. But which pay components should be included in the amount of holiday pay? This issue has now been resolved by the EU Court.
At a British airline company, pilots’ remuneration was composed of their basic pay, an allowance for the time spent flying and an allowance for the time spent away from their base airport.
But during holiday periods the pilots only received their basic pay and thus had to make do with less than their usual pay. A group of pilots were unhappy about that, claiming that the allowances should also be included in their holiday pay.
 
'Normal remuneration'
The matter ended up before the High Court of England and Wales, which decided to seek guidance from the EU Court on how to interpret 'paid annual leave' within the meaning of the Working Time Directive. The EU Court’s judgment was partly in favour of the pilots.
In its judgment, the Court notes first of all that the purpose of requiring employers to provide paid annual leave is to place the employees in a position which, as far as remuneration is concerned, is comparable to periods of work. In principle, this means that the holiday pay must correspond to the employee’s 'normal remuneration'.
Where the employee’s remuneration is composed of various components, 'normal remuneration' should not just mean the basic pay, but should include allowances received by the employee for performing the duties required under the employment contract. On those grounds, the Court held that the allowance for the time spent flying should be included in the holiday pay.
However, the Court emphasised that holiday pay should not necessarily include all possible allowances since employees on holiday should not be treated better than their colleagues at work. As a result, allowances for occasional or ancillary costs incurred when performing the duties required under the employment contract need not be included in the holiday pay. Accordingly, the allowance meant to cover the costs connected with the time that pilots have to spend away from their base airport need not be included in the holiday pay.
Finally, the Court noted that, during holiday periods, employees are also entitled to any allowances relating to their personal and professional status such as allowances for seniority, length of service and professional qualifications.
 
Norrbom Vinding notes:
  • that the ruling does not seem to give employees better rights than what they are already entitled to under the Danish Holiday Act; and

  • that, accordingly, the Danish concept of holiday pay must be deemed to fully comply with EU law; but

  • that, even so, it may turn out to be necessary to limit the access that the parties to a collective agreement currently have under Danish law to agree to dispense with the concept of holiday pay of the Danish Holiday Act.
The above does not constitute legal advice and should not be relied upon as such

For more information please visit www.norrbomvinding.com