UK: PDQ: Williams And Others v British Airways Plc [2011] - How To Calculate Holiday Pay


In a case which is progressing through the European Court of Justice (ECJ) the Advocate General (AG) has given her opinion, that paid annual leave should correspond to a worker's average earnings which includes certain supplements the worker is usually paid. Essentially a worker should not suffer any disadvantage from taking annual leave which may deter the worker from exercising that right.

It is important to note that the AG's role is to give her opinion on a legal solution before the ECJ deliver judgment. The AG's opinion is advisory and whilst it does not bind the ECJ, it is influential and is followed in the majority of cases.

If the AG's opinion is followed, in this case, the claimants who are pilots will be entitled to holiday pay that includes supplemental flying allowances in addition to basic pay.


The claimants are pilots employed by BA. Collective agreements incorporated into their contracts of employment entitled them to supplementary payments in addition to their basic salary (flying allowances), but did not specify how holiday pay was to be calculated. BA paid the claimants basic pay only in respect of periods of leave. The claimants maintained that this breached regulation 4 of the Civil Aviation (Working Time) Regulations 2004 (Civil Aviation Regulations) and that the supplement should be included in the calculation. The case went before the Court of Appeal, who dismissed the claims, ruling that there had been no breach of regulation 4 of the Civil Aviation Regulations. In particular, the Court of Appeal held that:

  • The interpretation of regulation 4 was a question of law for the court.
  • The ordinary meaning of "pay" in "paid annual leave" was not the same as pay earned while working.
  • Regulation 4 of the Civil Aviation Regulations would have set out the method of calculation had that been intended (as other domestic legislation did), and sections 221-224 of the Employment Rights Act 1996 were not relevant. Regulation 18(2)(b) of the Working Time Regulations 1998 (WTR) expressly provide that the provisions of the WTR dealing with the calculation of annual leave do not apply to calculate the holiday pay of aviation workers to whom the EU Aviation Directive (which was implemented into domestic law via the Civil Aviation Regulations) applies.
  • While in principle the decisions in Robinson-Steele and Stringer and others v HM Revenue and Customs [2009] IRLR 214 seemed to indicate that pay for annual leave should equate to "normal" or "comparable" pay to that earned while working, the ECJ's comments in those cases had only been statements of broad principles.

The Claimants appealed this decision, arguing that the EU Aviation Directive required payment of "normal remuneration" during annual leave in order to ensure that the worker on leave is in a position which is comparable to that when they are working. On 2 April 2010 the Supreme Court decided to refer five questions to the ECJ seeking clarification, in particular, on the meaning of the EU Working Time Directive and the EU Aviation Directive.

The questions referred to the ECJ were:

  1. Under the EU Working Time Directive and the Aviation Agreement annexed to the EU Aviation Directive, to what extent, if any, does European law define or lay down any requirements as to the nature and/or level of the payments required to be made in respect of periods of paid annual leave and to what extent, if any, may Member States determine how such payments are to be calculated?
  2. Is it sufficient that under national law and/or practice and/or under collective agreements and/or contractual arrangements, the payment made enables and encourages the worker to take and to enjoy their annual leave and does not entail any real risk that the worker will not do so?
  3. Or, must the pay either correspond precisely with or be broadly comparable to the worker's "normal" pay?
  4. If so, is the relevant measure or comparison: (a) pay that the worker would have earned during the particular leave period if they had been working, or (b) pay which they were earning during some other period and if so, what period when they were working?
  5. How should "normal" or "comparable" pay be assessed where: (a) a worker's remuneration is supplemented while engaging in a particular activity; (b) there is an annual or other limit on the time during which the worker may engage in that activity and that limit has been already exceeded or almost exceeded at the time the annual leave is taken?

The Advocate General's opinion

In regard to question 1, the AG referred to the judgement of Robinson-Steele that the term 'paid annual leave' in Article 7(1) of the EU Working Time Directive means that 'for the duration of annual leave within the meaning of the Directive, remuneration must be maintained'. In particular the worker should not suffer any disadvantage as a result of deciding to exercise his right to annual leave. The Supreme Court was wrong to state that the definition of paid annual leave in Stringer and Ors v HM Revenue and Customs as pay 'comparable' to that earned while working meant that deductions can be made from normal remuneration where appropriate. The AG's conclusion to questions 2 and 3 above are that holiday pay must be determined in such a way as to correspond to the worker's normal remuneration.

The AG examined the definition of 'pay' in Article 141(2) of the EC Treaty in order to determine the meaning of normal remuneration. It was concluded that in addition to basic wages, normal remuneration includes 'any other consideration, whether in cash or kind, which the worker receives, directly or indirectly, in respect of his employment'.

This interpretation of pay includes bonuses, ex gratia payments and supplements or allowances for mobility, working over time, or certain shifts. In this case the supplements are financial benefits paid for a specific activity performed by the pilots and as such constituted 'any other consideration' and were part of the pilots' normal remuneration, which must be paid during annual leave.

In relation to questions 4 and 5 the AG held that supplements must be included in the calculation of average remuneration only where they are systematic components of pay.

It is for Member States to set out the method of calculating average remuneration using a sufficiently representative reference period. The reference period may be the specific period during which the worker was on leave or an earlier period when the worker was continually active.


Employers should be aware of the AG's broad approach to the definition of 'normal remuneration'. If the ECJ follow the AG's decision, employers will need to review their policies on annual leave and ensure that they allow for worker's supplements to be included in the calculation of average remuneration during the reference period for which annual leave is to be calculated. For example, over time where it is worked on a regular basis will need to be included in the average earnings of a worker, if the ECJ endorse the AG's opinion.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nick Elwell-Sutton
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