1. Introduction

Holiday pay falls within the definition of “wages” under the Payment of Wages Act 1991 and may be the subject of a Section 5 complaint. While the substantive entitlement to annual leave arises under the Organisation of Working Time Act 1997, the failure to pay holiday pay that is properly payable engages the 1991 Act.

This article considers the interaction between the two statutes, the calculation of holiday pay, and the implications of recent Court of Justice case law on the calculation of normal remuneration.

2. Legislation and Case Law

Section 1 of the Payment of Wages Act 1991 includes “holiday pay” within the definition of wages. Section 5 of the Act prohibits deductions from holiday pay unless authorised by statute, contract or prior written consent.

Section 20 of the Organisation of Working Time Act 1997 requires that annual leave be paid in advance at the normal weekly rate. The Organisation of Working Time (Determination of Pay for Holidays) Regulations 1997 (S.I. 475 of 1997) provide the calculation methodology.

In British Airways plc v Williams C-155/10, the Court of Justice held that holiday pay must include all components of normal remuneration that are intrinsically linked to the performance of the worker’s tasks. This includes commission and certain allowances.

In Lock v British Gas C-539/12, the Court extended this principle to include commission, and in Hein C-385/17, the Court confirmed that overtime payments form part of normal remuneration where they are sufficiently regular.

3. Decision

Where a complainant brings a Payment of Wages complaint in respect of unpaid or underpaid holiday pay, the WRC will examine whether the pay reflects the worker’s normal remuneration including commission, overtime and allowances.

An employer that has paid only basic salary during annual leave, while the worker normally earns commission or regular overtime, will typically be found to have made an unlawful deduction equal to the difference.

Awards may extend back six months under Section 41 of the Workplace Relations Act 2015, with an additional six months where reasonable cause is shown. Statutory holiday pay claims under the 1997 Act may attract separate compensation up to two years’ remuneration.

4. Takeaway

Employers should review their holiday pay calculation methodology to ensure that it includes all components of normal remuneration, particularly commission, regular overtime and shift premiums. Spreadsheet calculations based on basic salary alone may be unlawful.

Employees who suspect underpayment should request a written calculation of their holiday pay from the employer. Where the calculation excludes regular components of remuneration, a Section 5 complaint may be appropriate.

5. Further information

This article was prepared for informational purposes only. For further advice, please email enquiries@crushell.ie or contact the offices of Crushell & Co Solicitors.

6. About Crushell & Co

Crushell & Co is a specialist law firm focused on protecting and advancing the rights of employees in Ireland. We offer a nationwide service, advising individuals on a wide range of legal and regulatory issues arising at work, including employment law, employment immigration and workplace accidents and injuries.

We help employees understand their position and options by translating complex legal issues into clear, practical advice. Our approach is tailored to each client, ensuring that our strategy is aligned with their personal and professional circumstances.

Connect: @CrushellLaw or www.crushell.ie