Holiday pay

Case 4: The facts

Mr Yarrow had outstanding holiday entitlement of between two and three days when his employment ended, for which he had to be paid. His employer rounded the amount down to two days, and calculated the payment by dividing his annual salary by 365 instead of the number of days he actually worked.

The ruling

The EAT held that the employer was wrong. Regulation 13(6) of the Working Time Regulations 1998 (WTR) stated – in a provision which has now been removed – that any fraction of a day is to be treated as a whole day, so Yarrow’s holiday should have been rounded up to three days.

The EAT also confirmed that the value of a day’s holiday pay should have been calculated according to the number of days Yarrow was required to work, not the number of calendar days. Although the EAT said in the case of Thames Water v Reynolds [1996] IRLR 187 that holiday pay should be calculated in accordance with the Apportionment Act 1870 (which would be to divide annual salary by 365), in the later case of Leisure Leagues v Macconnachie [2002] IRLR 600 it said the calculation should be based on the number of days actually worked. The Macconachie decision was the correct one, the EAT said, because it reflected both industry practice and the way that pay is calculated under the Employment Rights Act 1996.

Yarrow v Edwards Chartered Accountants UKEAT/0116/07