Proposed Change to Employees’ Annual Leave Entitlement to Prove Costly for Employers

There is a provision proposed in the new Workplace Relations Bill 2014 which, if passed, will have serious cost implications for employers in Ireland.

annual-leave-entitlements

This new provision will change section 19 of the Organisation of Working Time Act 1997, and provides that time spent by an employee on certified sick leave will be counted as time spent at work, and carrying out his/her duties. This means that the employee will accumulate annual leave during the leave year or within 6 months of the leave year, or within 15 months from the end of that leave year if the employee was unable to take annual leave due to illness.

The cost implications of this new provision are obvious for small business owners who have employees returning from long term sick leave, as the employee will have accrued annual leave while they were out sick.

The background to this is a number of European employment related decisions in 2009-Stringer v Revenue and Customs Commissioners and Schultz-Hoff v Deutsche Rentenversicherung Bund-which saw the Court of Justice of the European Union (CJEU) decide that employees who could not take annual leave due to being on sick leave were entitled to take the leave at a later date.

Public sector employees derived the benefit of the CJEU decision above because of the legal principle of Direct Effect-that is, that public sector employers as emanations of state are bound by the EU decisions.

However the Labour Court in Ireland has held that in respect of private sector employees and companies, the Labour Court was bound by Irish legislation-the Organisation of Working Time act, 1997.

However that Act is due to change now, courtesy of the Workplace Relations Bill, 2014.

Update August, 2015

This change in entitlements to sick employees has now come into effect from Saturday, August 1st, 2015.

Workers will now

  • Accrue holiday entitlements when they are out on certified sick leave and
  • be able to carry over annual leave for a period of 15 months after the leave year in question.

7 Simple Steps For Employers to Avoid Costly Employment Law Claims from Employees

employment-tribunals-ireland

It’s an easy mistake to make.

If you are an employer you are in danger of leaving yourself wide open to expensive claims by your employees if you fail to follow some basic but essential steps in your employment relationship with your employees.

In addition to settling successful claims brought by employees you also run the risk of fines and other sanctions from the National Employment Rights Authority (NERA) which has a dedicated unit, the Prosecution Services Unit, which can refer cases to the Chief State Solicitors Office for prosecution.

There is a wide body of employment legislation in force in Ireland which can be confusing for many employers.

In addition some industries have their own industry specific agreements called registered employment agreements (REA) and minimum wage rates. It is worth noting that these registered employment agreements are binding on all parties once registered with the Labour Court.

UPDATE May 2013

The Supreme Court, in May 2013, ruled that registered employment agreements are unconstitutional. You will find more updated information about registered employment agreements and employment regulation orders here.

Minimum requirements in employment law

1. Written statement of certain terms and conditions of employment

This statement must be given to the employee within two months of commencing employment.

The relevant act is the Terms of Employment (Information) Act 1994 which sets out the basic information that an employee is entitled to be given in writing about their contract of employment. You need to be careful that you provide the additional information set out in the revised act, which is

( fa ) a reference to any registered employment agreement or employment regulation order which applies to the employee and confirmation of where the employee may obtain a copy of such agreement or order, ]

F6 [ (g) the rate or method of calculation of the employee ’ s remuneration and the pay reference period for the purposes of the National Minimum Wage Act, 2000,

( ga ) that the employee may, under section 23 of the National Minimum Wage Act, 2000, request from the employer a written statement of the employee ’ s average hourly rate of pay for any pay reference period as provided in that section,

You need to be aware of statutory instrument S.I. No. 49/1998 – Terms of Employment (Additional Information) Order, 1998, which provides that you must give the employee a statement in writing containing particulars of the times and duration of the rest periods and breaks referred to in sections 11, 12 and 13 of the Act (The Organisation of Working Time Act, 1997.)

2. Written statement of pay

The Payment of Wages Act, 1991 obliges the employer to give a written statement of wages and deductions at the time of payment. Learn more about payment of wages here.

3. The minimum wage

There are exceptions to the minimum wage in Ireland of €8.65 per hour but most adults will be entitled to it; in addition certain industries have their own higher minimum wage. Learn more about minimum wage rates.

4. Maximum hours worked

Employers must keep records of hours worked by employees to ensure compliance with the maximum working week average of  48 hours which may be calculated over a 4, 6 or 12 month period depending on the industry. Learn more about working time and rest breaks here.

5. Working time and breaks

The breaks to which employees are entitled are set out in the Organization of Working Time Act, 1997. Currently break entitlements are 15 minutes per four and a half hours work and a 30 minute break for six hours worked.

6. Holiday entitlements

Holiday entitlements are also covered in the Organization of Working Time Act, 1997. In general full time workers are entitled to four  paid weeks holidays per year with part timers being entitled to similar holidays on a pro rata basis depending on hours worked which equates to one third of a week per month worked. (Learn more about how to calculate holiday entitlements.)

7. Minimum notice of termination of employment

The minimum notice periods are set out in the Minimum Notice and Terms of Employment Acts 1973 to 2001 and depend on the length of service with the minimum regardless of service being 1 week.

Conclusion

Employers can save themselves the considerable costs in money and time involved in defending or otherwise dealing with claims by their employees by some prudent management and housekeeping.

The list above is not exhaustive, but if you took care of those 7 areas you would be in good shape as an employer.

Doing business nowadays can be a worrying enough activity without inviting needless trouble on yourself for the want of a straightforward contract of employment and/or letter of offer and/or statement of your employees’ terms and conditions.

At a minimum you should carry out an audit of your

  • Contracts of employment
  • Staff handbooks
  • Disciplinary and grievance procedures
  • All workplace policy documents.

If you don’t have any of the above, you are asking for trouble, especially when there is a dispute or a NERA inspection.

How To Calculate Holiday Entitlements | Calculating Holiday Pay in Ireland

holiday-entitlements

Calculating holiday entitlements can be a real pain.

And can lead to bad feeling and a sense of grievance if not done correctly.

How do you calculate holiday entitlements in Ireland?

Annual leave, like minimum rest periods for employees, is covered by the Organisation of Working Time Act, 1997 and is a statutory right of an employee.

The first thing to note about annual leave is that all employees are entitled to paid holidays/annual leave.

There is no qualification requirement and part time employees are also protected by the Protection of Employees (Part Time) Work act, 2001.

The best way to deal with holidays for part timers is to give them holidays on a pro-rata basis with their full time colleagues.

What is “working time”?

Working time is an important concept for the purpose of calculating holiday entitlements, rest breaks, etc and is defined in section 2 of the Organisation of Working Time Act, 1977 as

working time” means any time that the employee is—
(a) at his or her place of work or at his or her employer’s disposal, and
(b) carrying on or performing the activities or duties of his or her work,

Time spent on call or standby?

Time spent on call or standby is regarded as working time provided the worker is required to be physically present at a particular place, regardless of the time actually done.

The Organisation of Working Time Act, 1977 does not apply to Gardai or members of the defence forces.

In addition, certain sections of  the Act do not apply to regulated employees, employees covered by collective agreements approved by the Labour Court, workers covered by registered employment agreements or employment regulation orders, workers working in exceptional circumstances or an emergency, workers at sea, doctors in training, a person who is employed by a relative in certain circumstances, a person who determines his/her own working time, shift workers and those doing “spread work” (periods of work spread out over the day).

How to Calculate Holiday Entitlements

The relevant section of the Organisation of Working Time Act, 1997 is section 19. It states:

19.—(1) Subject to the First Schedule (which contains transitional provisions in respect of the leave years 1996 to 1998), an employee shall be entitled to paid annual leave (in this Act referred to as “annual leave”) equal to—
(a) 4 working weeks in a leave year in which he or she works at least 1,365 hours (unless it is a leave year in which he or she changes employment),
(b) one-third of a working week for each month in the leave year in which he or she works at least 117 hours, or
(c) 8 per cent. of the hours he or she works in a leave year (but subject to a maximum of 4 working weeks):
Provided that if more than one of the preceding paragraphs is applicable in the case concerned and the period of annual leave of the employee, determined in accordance with each of those paragraphs, is not identical, the annual leave to which the employee shall be entitled shall be equal to whichever of those periods is the greater.
(2) A day which would be regarded as a day of annual leave shall, if the employee concerned is ill on that day and furnishes to his or her employer a certificate of a registered medical practitioner in respect of his or her illness, not be regarded, for the purposes of this Act, as a day of annual leave.
(3) The annual leave of an employee who works 8 or more months in a leave year shall, subject to the provisions of any employment regulation order, registered employment agreement, collective agreement or any agreement between the employee and his or her employer, include an unbroken period of 2 weeks.
(4) Notwithstanding subsection (2) or any other provision of this Act but without prejudice to the employee’s entitlements under subsection (1), the reference in subsection (3) to an unbroken period of 2 weeks includes a reference to such a period that includes one or more public holidays or days on which the employee concerned is ill.
(5) An employee shall, for the purposes of subsection (1), be regarded as having worked on a day of annual leave the hours he or she would have worked on that day had it not been a day of annual leave.
(6) References in this section to a working week shall be construed as references to the number of days that the employee concerned usually works in a week.

Source: www.irishstatutebook.ie

As you can see there are a number of different methods of calculation. However you must use the one which gives the employee the biggest entitlement.

In summary therefore all employees are entitled to:

  • 4 working weeks where at least 1365 hours have been worked in the leave year OR
  • One third of a working week where the employee works at least 117 hours in a calendar month OR
  • 8% of the hours worked in a leave year (subject to a maximum of 4 working weeks)

Note 1: the maximum entitlement is four of the employee’s normal working weeks and NOT twenty days; this can be significant because the “working week” itself is not defined in the Act and must be construed by reference to the number of days/hours encompassing a work cycle.

Note 2: pay must be paid in advance of the annual leave.

Note 3: periods of sick leave are not counted as hours worked but parental and maternity leave are. Periods of sick leave are now counted for the purpose of calculating holiday entitlements. Please read this article.

Examples

(a)    4 working weeks where the employee works at least 1,365 hours in the year

Sheila works a 39 hour, 5 day week.

She has worked 1400 hours at the end of September. As this exceeds 1,365 hours she is entitled to 4 weeks paid holidays.

Her normal working week is 5 days. She is entitled therefore to 20 days (4 weeks @ 5 days) paid annual leave.

(b)   One third of a working week per calendar month in excess of 117 hours

Michael works a four day week at 39 hours per week.  This is in excess of 117 hours per month (over 600 hours in fact).

So Michael accumulates annual leave at a rate of 1.34 (one and one third) days per month worked, that is, one third of four days = 1.34.

In a full year (12 months) Michael will accumulate 1.34 * 12 = 16.08 days annual leave.

( c) 8% of the hours worked

Jonathan works for 8 weeks and did 200 hours over the 8 weeks and then quit.

Jonathan is entitled to 8% of hours worked, that is, 16 hours of paid leave which he is entitled to receive when leaving the employment.

NOTE: if more than one of these methods of calculation is applicable, the employer must use the method which gives the greatest entitlement.

How Much Holiday Pay?

If the employee is paid hourly or weekly or monthly, indeed any time based method, then she is entitled to a normal week’s wages before the leave commences and this includes any normal bonus or allowance but excludes overtime.

If the employee is paid a piece rate, the rate of holiday pay is the average weekly pay calculated over the 13 weeks prior to commencing leave.

How to Calculate Holiday Pay

Firstly, if the employee is paid by reference to a salary or a time rate, the amount due for one week of annual leave will be the amount paid to him/her for a normal working week prior to the commencement of holidays.

This payment includes any regular allowance and bonus but does not include overtime.

Secondly, if the employee is not paid by reference to a time rate but by reference to commission or a piece or productivity rate, then his/her holiday pay for one week of annual leave is calculated by reference to the average pay for that employee calculated over the 13 weeks immediately prior to taking leave.

What if the employee gets sick during annual leave?

If the employee provides a sick certificate then his leave should not be counted for the days of his certificate and the employees will be allowed carry over his leave, even where it takes him/her into another leave year.

Timing of leave

The employer can decide when annual leave can be taken, subject to certain requirements such as the requirements of the business and the requirements of the employee in respect of work/life/family balance.

By the same token it is the employer’s responsibility to see that the employee takes his/her full entitlement within the leave period.

Leave must be given and taken within the leave year, unless the employee consents to getting leave in the first six months of the following leave year.

Any leave not taken is forfeited unless the employer agrees to the leave being taken within 6 months of the end of the leave year.

An employee has no cause of action for leave untaken in previous years.

The leave year begins on the 1st of April according to the Act but the employer can stipulate a different time period.

20.(1) The times at which annual leave is granted to an employee shall be determined by his or her employer having regard to work requirements and subject—
(a) to the employer taking into account—
(i) the need for the employee to reconcile work and any family responsibilities,
(ii) the opportunities for rest and recreation available to the employee,
(b) to the employer having consulted the employee or the trade union (if any) of which he or she is a member, not later than 1 month before the day on which the annual leave or, as the case may be, the portion thereof concerned is due to commence, and
(c) to the leave being granted within the leave year to which it relates or, with the consent of the employee, within the 6 months thereafter.
(2) The pay in respect of an employee’s annual leave shall—
(a) be paid to the employee in advance of his or her taking the leave,
(b) be at the normal weekly rate or, as the case may be, at a rate which is proportionate to the normal weekly rate, and
(c) in a case in which board or lodging or, as the case may be, both board and lodging constitute part of the employee’s remuneration, include compensation, calculated at the prescribed rate, for any such board or lodging as will not be received by the employee whilst on annual leave.
(3) Nothing in this section shall prevent an employer and employee from entering into arrangements that are more favourable to the employee with regard to the times of, and the pay in respect of, his or her annual leave.
(4) In this section “normal weekly rate” means the normal weekly rate of the employee concerned’s pay determined in accordance with regulations made by the Minister for the purposes of this section.

Section 20, Organisation of Working Time Act, 1997.

How much pay?

Annual leave is paid leave and the obligation is to pay the normal weekly rate of pay.

A statutory instrument, 475/1997 sets out in detail how to calculate payment which will depend on a number of factors and need to account for bonuses (may be included), allowances (may be included), and overtime (not included). (See above)

Losing the job?

The employee is entitled to compensation for any leave that they have not taken in the leave year.

23.—(1) Where—
(a) an employee ceases to be employed, and
(b) the whole or any portion of the annual leave in respect of the current leave year or, in case the cesser of employment occurs during the first half of that year, in respect of that year, the previous leave year or both those years, remains to be granted to the employee,
the employee shall, as compensation for the loss of that annual leave, be paid by his or her employer an amount equal to the pay, calculated at the normal weekly rate or, as the case may be, at a rate proportionate to the normal weekly rate, that he or she would have received had he or she been granted that annual leave.

Public Holidays

Public holidays in Ireland are set out in the act as follows:

1. Each of the following days shall, subject to the subsequent provisions of this Schedule, be a public holiday for the purposes of this Act:
(a) Christmas Day,
(b) St. Stephen’s Day,
(c) St. Patrick’s Day,
(d) Easter Monday, the first Monday in May, the first Monday in June and the first Monday in August,
(e) the last Monday in October,
(f) the 1st day of January,
(g) any other day or days prescribed for the purposes of this paragraph.
2. The Minister may by regulations vary paragraph 1 by substituting for any day referred to in that paragraph another day.
3. An employer may, for the purpose of fulfilling any relevant obligation imposed on him or her by this Act, treat as a public holiday, in lieu of a public holiday aforesaid, either—
(a) the Church holiday falling in the same year immediately before the public holiday, or
(b) the Church holiday falling in the same year immediately after the public holiday or, if the public holiday is a day which is a public holiday by virtue of paragraph 1 (b), the 6th day of January next following,
by giving to the employee concerned notice of his or her intention to do so not less than 14 days before the Church holiday (where that holiday is before the public holiday) or before the public holiday (where that holiday is before the Church holiday or, as the case may be, the said 6th day of January).
4. Each of the following days shall be a Church holiday for the purposes of paragraph 3:
(a) the 6th day of January, except when falling on a Sunday,
(b) Ascension Thursday,
(c) the Feast of Corpus Christi,
(d) the 15th day of August, except when falling on a Sunday,
(e) the 1st day of November, except when falling on a Sunday,
(f) the 8th day of December, except when falling on a Sunday,
(g) any other day or days prescribed for the purposes of this paragraph.

Public holidays confer public holiday benefits on employees and the employer has a choice of

  1. A paid day off on that day
  2. An additional day’s pay
  3. An additional day of annual leave
  4. A paid day off within a month of that day.

How much you are entitled to be paid will be roughly similar to the calculation of annual leave pay as set out in SI 475/1997, Organisation of Working Time (Determination of Pay for Holidays) Regulations, 1997.

Public Holiday Benefit Entitlements

Full-time workers have an immediate entitlement to benefit for the public holidays whilst part-time workers have entitlement to benefit when they have worked 40 hours in the previous 5 weeks.

So, when the employee works on the public holiday, they are entitled to their normal pay. But they are also entitled to a public holiday benefit. However this benefit may vary from one public holiday to another, depending on whether they would have been normally due to work or not.

If the business is closed on the public holiday, and the employee would normally have been due to work, they will be entitled to their normal day’s wages.

If the business is open and the employee works, then they are entitled to their normal day’s wages and, in addition, an additional day’s wages or paid time off.

If the business is open, but the employee does not work and normally doesn’t, then they will be entitled to one fifth of their normal weekly wages or a paid day off within a month or an extra day’s annual leave, as the employer decides.

Public Holiday Rate of  Pay

For an employee who is normally required to work on the day on which a public holiday falls

If the employee’s pay is calculated by reference to a time rate or salary, he is entitled to a day’s pay according to his normal daily hours prior to the holiday;

If the employee’s pay is calculated by reference to a piece rate or commission, he is entitled to the average daily pay calculated over the 13 weeks prior to the public holiday.

For an employee who is not normally required to work on the day on which the public holiday falls

If the employee’s pay is calculated by reference to a time rate or salary, he is entitled to pay equivalent to one fifth of the normal weekly hours last worked before the holiday;

If the employee’s pay is calculated by reference to a piece rate, he is entitled to one fifth of the average weekly pay calculated over 13 weeks prior to the public holiday.

Complaints

A claim may be brought in the first instance to the WRC (Workplace Relations Commission) (within 6 months of alleged breach, 12 months allowed in exceptional situations), and thereafter appealed to the Labour Court.

Section 27 deals with complaints to the Rights Commissioner and the sanctions which can be imposed which include:

(3) A decision of a rights commissioner under subsection (2) shall do one or more of the following:
(a) declare that the complaint was or, as the case may be, was not well founded,
(b) require the employer to comply with the relevant provision,
(c) require the employer to pay to the employee compensation of such amount (if any) as is just and equitable having regard to all the circumstances, but not exceeding 2 years remuneration in respect of the employee’s employment, and the references in the foregoing paragraphs to an employer shall be construed, in a case where ownership of the business of the employer changes after the contravention to which the complaint relates occurred, as references to the person who, by virtue of the change, becomes entitled to such ownership.

Record Keeping

Section 25 of the Act requires employers to maintain employee records of holidays and public holidays for a period of 3 years. Statutory Instrument 473/2001 contains the regulations concerning the records and forms that must be kept.

Terry Gorry & Co. Solicitors has prepared a spreadsheet to record hours worked which is based on these regulations and on the OWT1 form prescribed which you can download by clicking on the link. The requirement to complete our form or form OWT1 is only where the employer has no electronic clocking-in facilities.

Section 27 of the act allows an employee to complain about a breach of a “relevant provision” to a Rights Commissioner. (A relevant provision concerns rest periods and/or holiday entitlements).

A Rights Commissioner (or Labour Court on appeal) can

(3) A decision of a rights commissioner under subsection (2) shall do one or more of the following:
(a) declare that the complaint was or, as the case may be, was not well founded,
(b) require the employer to comply with the relevant provision,
(c) require the employer to pay to the employee compensation of such amount (if any) as is just and equitable having regard to all the circumstances, but not exceeding 2 years remuneration in respect of the employee’s employment, and the references in the foregoing paragraphs to an employer shall be construed, in a case where ownership of the business of the employer changes after the contravention to which the complaint relates occurred, as references to the person who, by virtue of the change, becomes entitled to such ownership.

Holiday and public holiday entitlements can also be claimed at an Employment Appeals Tribunal.