In the case of Hein v Albert Holzkamm GmbH a construction worker in Germany working under a collective agreement. The collective agreement provided that holiday pay would be paid on the basis of a 13-week average calculation. This calculation of holiday pay was in accordance with the national law in Germany. After a 26-week lay-off, his holiday pay was calculated on the basis of this 13 week average, excluding overtime.
European Directive
Consequently, this meant that it was lower than his normal pay, in breach of Article 7(1) of Directive (EC) 2003/88. [note] Article 7(1), Annual leave
1. Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice.
2. The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.[/note] This Directive relates to certain aspects of the organisation of working time of the EU Member States.
European Court of Justice
The Court of Justice of the European Union clarified a number of points in relation to holiday pay and annual leave, as follows:-
- Where overtime was exceptional and unforeseeable, it did not have to be taken into account in calculating minimum holiday pay;
- The right to accrue annual leave arises from actual work done. The result of this being, annual leave did not accrue during a period when the employee was not actually working;
- Calculating holiday pay can be a complex task for employers. For example, where employees work irregular hours or shifts, or are subject to seasonal variations in the demand for work;
Following the Taylor Review, the confusion is compounded by the recent indication by the government that the reference period for the calculation of holiday pay may be changed.
It is therefore important that employers take comprehensive legal advice regarding Collective Agreements and Article 7(1) of Directive (EC) 2003/88. It is essential for employer’s to make sure their calculation mechanisms are in compliance with national and European legislation to avoid any future claims for unlawful deductions.
