In this issue:
Pay in lieu of holiday accrued during sick leave
In the case of Khan v Martin McColl the employment tribunal dismissed Mr Khan's claim for holiday pay on the basis that he had not requested holiday whilst off on long-term sick leave, and so had not been "denied" it. It also held that the employer's payment on termination in lieu of holiday accured durign the last year of employment rendered the claims for earlier accured but unused holiday out of time.
He had two weeks' of accrued but unused holiday at that point, which was carried forward into 2008 leave under the guarantee. He was entitled to four weeks' holiday in 2008, none of which he took because he went on long-term sick leave in May 2008 and did not work again prior to his resignation in August 2009. On the termination of his employment, Martin McColl paid him in lieu of the holiday which accrued during 2009 prior to his resignation. Mr Khan brought a claim for the four weeks' holiday from 2008 together with the two weeks' holiday that he carried forward from 2007.
Martin McColl resisted the claim on two grounds; first, he argued that the holiday claim was out of time on the basis that he had made a payment in lieu of the holiday that was accrued in 2009, so there was no claim for that year. Second, the right to holiday pay for 2008 expired on 31 December 2008 and any claim for holiday pay in that year therefore had to be brought by 31 March 2009 (applying the normal 3 months time limit for bringing such claims).
The tribunal held that this analysis must be right, even though "a perfectly good claim ... can be defeated simply by the expedient of paying the last amount of holiday pay". Accordingly the claim failed on this point.
The tribunal next referred to the European Court of Justice (ECJ) ruling that workers on sick leave have the right to carry their holiday entitlement forward if they are "denied" their holiday. However, Mr Khan did not request any holiday and so he was not "denied" the right to take holiday. It was acknowledged that Mr Khan did not know that he could request holiday and therefore did not.do so. However, it held that this was "not germane": there are many cases where individuals do not make a claim because they are not aware of their rights, but this was not a compelling reason for Mr Khan's claim to succeed. The tribunal therefore also dismissed the claim on this ground.
While this is only a tribunal decision, and so is not binding on any other tribunal it is one that employers will want to rely on in similar circumstances. First, it is authority for the proposition that employers can deprive a worker of holiday pay for the previous years leave by making a payment in lieu of unused holiday accrued in the last year of employment. Second, its analysis of the effect of the word "denied" in the ECJ of unused holiday accrued in the last year of employment. Second, its analysis of the effect of the word "denied" in the ECJ judgment gives employers' another way of avoiding claims, as there are many workers who only become aware of their right to holiday during sick leave after their employment has been terminated.
The Government has published the National Minimum Wage Regulations 1999 (Amendment) Regulations 2010, which will increase the national minimum wage as of 1st October this year;
- workers aged 21 and over from £5.80 to £5.93 per hour.
- workers aged between 18 and 20 will increase from £4.83 to £4.92 and
- workers aged below 18 will rise from £3.57 to £3.64 per hour
Additional Paternity Leave Update
Recent comments made by Theresa May, Minister for Women and Equalities, suggest that the Additional Paternity Leave Regulations 2010 introduced by the Labour Government, just weeks before the general election, could be postponed and re-written by the Coalition.
The Additional Paternity Leave Regulations 2010 give fathers of babies due on or after 3 April 2011 the right to 'share' up to 26 weeks of the mother's maternity leave, once the mother has returned to work. For further details please click here New Legislation Update - Additional Paternity Leave.
Theresa May has commented “we are looking into how we can avoid constantly requiring businesses to effect innovations, and we are examining the timetabling of the additional paternity leave and flexible parental leave regulations.”
At the moment, it is not known how or when the Coalition will revise the right to take additional paternity leave. However, reports suggest that the Coalition may take a more radical approach than Labour, with suggested proposals including giving parents greater autonomy in deciding how to split the period of leave and possibly allowing both parents to be off work at the same time.
As the regulations are not due to take effect until April 2011, there is still time for the Coalition to review and re-write the legislation. Therefore, in order to avoid wasting costs drafting policies to comply with the current regulations, employers may wish to delay taking any action for while.
Salary sacrifice voucher update
Firms that offer vouchers to employees in exchange for salary sacrifices may face a VAT charge, following a recent decision of the European Court of Justice (ECJ) in the case of AstraZeneca v. HMRC (HM Revenue & Customs)
AstraZeneca had given employees vouchers in exchange for salary sacrifices. The VAT element of the vouchers had been recovered as input VAT, but no payment of output VAT was made when the vouchers were supplied to staff.
The ECJ decided that the vouchers represented a taxable supply (i.e. the payment for them was the sacrificed salary). This means that although employers will get credit for the input tax they incur when purchasing the vouchers, they will also have to account for the VAT when supplying the vouchers to staff.
Employers operating salary sacrifice schemes will be disappointed with the decision, as it means that it is now open to HMRC to assess the output tax that employers should have accounted for upon supply of the vouchers. It is not yet known what HMRC's reaction to the decision will be.
Ask the Expert – withholding wages
Q: One of my employees has decided to resign only a few months after I paid for him to participate in an expensive training course. I would like to withhold some of his last month's wages to cover the cost of the course. Is this possible?
A: You need to check what your employee's contract says before you withhold any money from his wages.
In order to have the right to deduct money in this way, you must have the contractual right to do so. If you do not have the right to make the deduction you will have made what is known as an 'unlawful deduction of wages' and the employee will be able to re-claim the money from you in the Employment Tribunal.
If you have a question you would like us to answer in nest month's bulletin please email us at asktheexpert@withyking.co.uk. Please make all question general in nature and limited to approximately 250 words.
