December 15, 2017

Could you Afford to Pay 13 years’ Holiday Pay?

Businesses that employ ‘gig economy’ workers, such as taxi or delivery firms, and deny them paid holiday leave could now be forced to pay huge bills as a result of a recent ruling from the European Court of Justice (ECJ).

The ruling found that a commission-based salesman was entitled to claim for up to 13 years’ worth of holiday pay that he was denied between 1999 and 2012, despite working on a ‘self employed’ basis.

This bombshell decision is likely to have a major impact on companies that may have miscategorised their workers as self-employed. If this status is challenged employers may be liable for back holiday pay when the workers’ employment is terminated.

It is thought that around one million people are employed in this way in the UK.

How was he able to claim?

Conley King, who had been working on a self-employed basis since 1999, was dismissed in 2012 at the age of 65.

Following his dismissal, Mr King claimed unlawful dismissal owing to age discrimination at an employment tribunal.

The tribunal, hearing his claim, stated that although he was not working under a contract of employment, he was in employment under Section 83(2) of the Equality Act 2010 for the purposes of his claim for age discrimination. In addition, he was classed as a ‘worker’ under the Employment Rights Act and the Working Time Regulations and was, therefore, entitled to workers’ rights and should have paid holidays.

The European court was then asked to decide whether EU law allowed him to claim payment for the entire length of his employment.

The Attorney General ruled that:

“In circumstances where an employer has not provided a worker with paid leave, the right to paid leave carries over until he has the opportunity to exercise it and on termination of employment the worker has the right to payment in lieu of leave that remains outstanding.”

The decision that there was no time limit for his claim now leaves the door wide open for similar cases where companies such as taxi and delivery firms routinely use staff on a self-employed basis.

What are the potential costs to employers with this type of worker?

Mr King was entitled to 13 years’ worth of holiday pay. Assuming the minimum holiday entitlement of 28 days per year and a minimum wage of £7.50 per hour for 8 hours per day, this gives us £60 per day x 28 days = £1680 per year.

Multiply that by 13 years and you have a total of £21,840.

The Independent Workers Union of Great Britain (IWGB) fights for the rights of some of the most vulnerable and under-represented workers in the UK and is likely to follow up on more claims like this.

So how can you prevent a claim like this?

If you use ‘self-employed’ workers it is essential that these workers are legally ‘classed’ as self-employed.

Normally, someone who is self-employed will:

  • Be in business for themselves and responsible for the success or failure of their business
  • Decide what work they do and when, where and/or how they will do it
  • Be responsible for fixing any unsatisfactory work at their own expense and in their own time
  • Be able to hire someone else to do the work for them
  • Use their own money to buy business assets, to cover running cots and to provide tools and equipment needed to do their work
  • Agree a fixed price for their work ie. a quote for the job
  • Not be paid through the PAYE scheme
  • Invoice the company for the work they do either at the end of the job or at times agreed
  • Pay their own income tax and National Insurance contributions
  • Provide their own public liability insurance
  • Not be paid sick pay or holiday pay when they’re not working
  • Be able to work for more than one company

If you are unsure about whether any of your workers are self-employed or should be classed as employees, please contact us so we can assist.

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About the author

Elaine Pritchard

About the author

Elaine Pritchard

Elaine has a wealth of knowledge in producing contracts, training materials and other documentation as well as training other consultants. She piloted a scheme whereby she went on-site to act as a client’s HR Manager two days per week, whilst the post-holder was on maternity leave. Elaine also previously ran her own retail business for seven years, employing four people. Elaine is a field based consultant for Moorepay and provides on-site HR and Employment Law advice, consultancy and training services to our clients.

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