Average Pay Agreement: Reps Briefing

[Kaning It]

Is there any reason why we didn't go for a simpler method? When on annual leave, award average of previous 52 weeks earnings? Wouldn't this have been easier on Payroll systems and restored trust in senior management, because they get their full annual leave pay for all 5.6 weeks and we are capped at 4 weeks.

This guidance explains how to calculate statutory holiday pay for workers without fixed hours or fixed rates of pay. It is for use by workers or employers.

Holiday pay is based on the principle that a worker should not suffer financially for taking holiday.

In simple terms, almost all workers, except those who are genuinely self-employed, are legally entitled to 5.6 weeks’ paid holiday per year. This entitlement is derived from the Working Time Regulations 1998.[footnote 1]

The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.

A worker continues to accrue holiday entitlement while they are on sick leave, maternity leave, parental leave, adoption leave and other types of statutory leave. A worker may request holiday at the same time they are on sick leave.

The majority of the UK’s workforce are full-time workers on fixed hours and fixed pay. For these workers, typically on a fixed monthly salary, if they take a week’s holiday, they will receive the same pay at the end of the month as they normally receive.

The situation becomes more complicated when a worker does not work fixed or regular hours and so does not receive the same amount of pay each week, month or other pay period. In these circumstances an employer should normally look back at a worker’s previous 52 paid weeks (known as the holiday pay reference period) to calculate what that worker should be paid for a week’s leave.

Not just the simpler way but the legal way that companies who do it correctly pay average holiday pay. It used to be the average over the last 12 weeks and last April, it changed to the average over the last 52 weeks.

This 8 hours a month in every month within a 6 month period is an unnecessary complication which only serves to save RM money at the expense of their employees who are entitled to holiday pay at the average of their last 12 months pay:

https://www.peoplemanagement.co.uk/expe ... shell#gref

[ted_e_bear]

Some good posts on this subject now especially the last one, the CWU need to go back and get this amended to remove the 8hrs per month issue.

[spen]

Exactly,, why should people have to jump through hoops and meet rm's terms and conditions on something the law states we are legally entitled too

[Woody Guthrie]

You are all confusing the qualification criteria for what constitutes regular overtime and the method of calculation of what will be paid.

These are two separate legal positions.

Not everyone who works overtime qualifies under the EAT ruling, that's the same with any company, it has to be regular overtime and the only way to measure that is to set a bar. Unfortunately, there is no definition setting out how regularly overtime must be worked for it to be included in an employee’s holiday pay calculation, but the basic principle is that pay that is ‘normally received’ should be included. If it were simply left to what RM defined as "normally received" there would be a lot of members out of pocket.

Setting it at 8 hrs a MONTH is a very low bar compared to many companies.

The average over the reference period is how actual pay is calculated and is entirely different to the qualification criteria.

[Tamsk]

I don't think anyone's arguing that the 8 hours a month threshold is unreasonable; what they're saying is that it's unreasonable for missing one month to disqualify you from six months' pay. Making it four months in six, say, would still be "regular" and make it much less likely someone will miss out on half a year's entitlement because of a single blip in qualification.

[kevbo]

I don't think anyone's arguing that the 8 hours a month threshold is unreasonable; what they're saying is that it's unreasonable for missing one month to disqualify you from six months' pay. Making it four months in six, say, would still be "regular" and make it much less likely someone will miss out on half a year's entitlement because of a single blip in qualification.

Exactly! It's not 8 hours a month average it's 8 hours a month minimum every month to qualify which will cause a lot of people to lose out through sickness or annual leave. No need whatsoever to work it out on a 6 monthly basis other than to disqualify some who are entitled. Typical Royal Mail.

[Kaning It]

You are all confusing the qualification criteria for what constitutes regular overtime and the method of calculation of what will be paid.

These are two separate legal positions.

Not everyone who works overtime qualifies under the EAT ruling, that's the same with any company, it has to be regular overtime and the only way to measure that is to set a bar. Unfortunately, there is no definition setting out how regularly overtime must be worked for it to be included in an employee’s holiday pay calculation, but the basic principle is that pay that is ‘normally received’ should be included. If it were simply left to what RM defined as "normally received" there would be a lot of members out of pocket.

Setting it at 8 hrs a MONTH is a very low bar compared to many companies.

The average over the reference period is how actual pay is calculated and is entirely different to the qualification criteria.

Can you give examples of these other companies and what their criteria is? Successive Employment Tribunals and the Good Work Plan have deemed that holiday pay is based on average pay over the last 12 months and that doesn’t just include overtime.

If RM have to write new payroll software to make this work, average pay over last 12 months is a simple calculation, the ins and outs of this 6 month criteria will just slow things down.

This proposed system means if RM have a policy to cut back on overtime one month in every 6, no one will get what they deserve. Similarly if someone gets badly bitten on the hand by a dog and can’t work for 4 weeks, they too will be penalised.

If RM want to continue their business on a 25 hour a week model and so rely on overtime to make it work, they should at least play fair and legal.

After 7 years of fight, RM have earnt themselves a system which is only back dated 2 years and allows them wriggle room to not pay it. Nice work by their lawyers.

[clashcityrocker]

I haven't seen a figure anywhere.
How much do Royal Mail think this is going to cost them?

[Woody Guthrie]

Successive Employment Tribunals and the Good Work Plan have deemed that holiday pay is based on average pay over the last 12 months and that doesn’t just include overtime.

Only going to say this once more.
That is how holiday pay is calculated, it is not how a company decides whether you fit the criteria.

The EAT decision only covers regular overtime and allowances, it does not cover all overtime. How a company defines regular varies from company to company, at the moment there is no legal definition of regular.

Royal Mail has defined it as 8hrs a month. It's not a lot.

[Dexydog]

This was a negotiation.
In a negotiation neither side gets what they want, and meet in the middle.
Personally I think it's a rubbish outcome- if anyone doesn't like it vote no and take your chance at an industrial tribunal even if everyone else votes yes.
There's no use getting your knickers in a twist over this- it is what it is, take it or fight it but you would be on your own in court and who knows what the outcome might be.

[Kaning It]

Successive Employment Tribunals and the Good Work Plan have deemed that holiday pay is based on average pay over the last 12 months and that doesn’t just include overtime.

Only going to say this once more.
That is how holiday pay is calculated, it is not how a company decides whether you fit the criteria.

The EAT decision only covers regular overtime and allowances, it does not cover all overtime. How a company defines regular varies from company to company, at the moment there is no legal definition of regular.

Royal Mail has defined it as 8hrs a month. It's not a lot.

I accept the distinction you are drawing. However, in reality the points are not distinct. The Taylor report was clear that employees should not be disadvantaged when going on holiday hence why the pay reference period was changed from 12 to 52 weeks in the Working Time Regs.

Further, the EAT in both Willetts & Flowers said that holiday must reflect normal pay. Overtime is considered normal if paid regularly or repeatedly over sufficient time. In the Willetts case, overtime worked one in every four or five weeks was considered sufficient. Yet RM want overtime not just to be paid but paid at a certain level for every month over a 6 month period. Missing the criteria in one month out of 6 due to a policy of reduced overtime, new cheaper cadets filling gaps, sickness or annual leave should not leave an employee at a disadvantage as that is not what the law intends.

One of the reasons the calculation period changed from 12 to 52 weeks was to even out the peaks and troughs. This criteria seeks to undo that levelling out, especially when overtime hours are so high exactly because of the RM 25 hour contract business model.

You referred to this being better than other companies, what are these other companies and what is their criteria?

[Kaning It]

Successive Employment Tribunals and the Good Work Plan have deemed that holiday pay is based on average pay over the last 12 months and that doesn’t just include overtime.

Only going to say this once more.
That is how holiday pay is calculated, it is not how a company decides whether you fit the criteria.

The EAT decision only covers regular overtime and allowances, it does not cover all overtime. How a company defines regular varies from company to company, at the moment there is no legal definition of regular.

Royal Mail has defined it as 8hrs a month. It's not a lot.

Sorry, meant to say I agree 8 hours a month is not a lot but its unnecessary and actually it’s not 8 hours a month, its 8 hours a month every month for each 6 months. That is a different thing altogether.

[Woody Guthrie]

If you don't have any definition of regular you are effectively saying that someone who works 5hrs a week overtime every week should be paid the same on holiday as someone who works 70hrs for the four pressure weeks at Christmas and doesn't do another hour of overtime all year.

I would humbly suggest that's not what people were fighting for.

[Blaine]

If you don't have any definition of regular you are effectively saying that someone who works 5hrs a week overtime every week should be paid the same on holiday as someone who works 70hrs for the four pressure weeks at Christmas and doesn't do another hour of overtime all year.

I would humbly suggest that's not what people were fighting for.

He's not quite saying that I think. In your example, in an ideal scenario the person working 5 hours a week extra should get 5 hours for every weeks leave they take. The person working 70 hours for 4/52 weeks should get the average earnings of the previous 52 weeks as per the reference period as their 4 weeks per year would be regular - I can't be bothered to work out the exact calculation, but basically it will be worth a couple of quid extra on annual leave weeks. Under the current agreement, they won't get this so it would have to be taken to tribunal every year if you really wanted the extra few quid.

He's also trying to say the following things:

- If you do 7 hours a month for 52 weeks/12 months, you should get 7 hours pay for every months annual leave you take (so basically 7 hours extra pay per year). Under the current agreement, you won't get this because it falls short of the 8 hour requirement.

- If you do 8 hours a month for 48 weeks but take all of your annual leave in a consecutive 4 weeks/1 month, you still get the 8 hours for every months annual leave you take. Under the current agreement, whilst this meets the 8 hour requirement, it does not meet the 4-5 week recording of overtime requirement (you cannot record overtime whilst you are on annual leave despite RM stating they will assume 2 weeks annual leave per 6 month period) and therefore you won't get this in that 6 month period. You would almost certainly win in a tribunal however due to the clear regularity. In this case, we should look at the previous 52 weeks as per UK law, the agreement is useless here.

It's the way RM splits it down into 6 months and requiring the recording of overtime every month that people have issue with. It's very borderline whether it's legal or not. Some edge cases could still go to tribunal and win. Not going to look good in the press if we see RM losing tribunal cases when an agreement was made specifically to stop them.

[iainwilson]

Example for you

I worked 133.45 “regular” overtime hours in a 6 month period.
Due to illness I was off 4 weeks in one of the 6 month pay periods.
In that period I still did 6.50 hours.
Because I missed 1.50 hours I miss out on 11.12 hours pay.
This is not right.