News and Events

Holiday Pay on Termination

  • Posted

Can a ‘relevant agreement’ reached in relation to holiday pay on termination of employment provide for a lower payment than an employee would get under the calculations set out in the Working Time Regulations 1998 (‘WTR’)?

No, held EAT in Connor v Chief Constable of West Yorkshire Police.

In this case the Claimant’s contract of employment stated that holiday pay on termination of employment would be calculated based on 1/365th annual salary. This resulted, on termination, in him receiving a lower payment for accrued holiday than that which he would have received using the calculation set-out in the WTR.

The tribunal held that the 1/365th calculation was a valid ‘relevant agreement’ under Regulation 14(3) (which states that the amount of holiday pay due on termination of employment is either that which would be prescribed if the formula set out in the WTR were applied or such other sum which is stated to be payable on termination of employment pursuant to a ‘relevant agreement’) and that the Claimant had suffered no unlawful deduction.

The EAT disagreed. They held that a ‘relevant agreement’ under Regulation 14(3) on the payment of holiday on termination of employment cannot result in a payment which is lower than that which would be calculated using the method set out in the WTR. The Claimant was entitled to the higher amount.