Employment Cases Update

Econ Engineering Ltd v Dixon and others UKEAT/0285/19/AT

Date published: 02/07/2020

Appeal against the ET’s conclusion that a profitability bonus to which the Claimants were contractually entitled should be included in “the amount of a week’s pay”. Appeal allowed.

The Claimants, who work for the Respondent in various roles, were paid an hourly rate of pay, as well as shift allowances and pay for overtime, plus a "profitability bonus". They brought unlawful deduction of wages claims in the ET, which raised various issues in relation to the calculation of their holiday pay, and the ET held that the application of section 221(2) of the Employment Rights Act 1996 ("ERA") led to the conclusion that the profitability bonus should be included in the calculation of their pay for annual leave under the Working Time Regulations 1998. The Respondent appealed on the ground that the ET's analysis of section 221(2) of ERA was wrong in law.

The EAT held that the words "which is payable by the employer under the contract of employment in force on the calculation date if the employee works throughout his normal working hours in a week" in section 221(2) of ERA referred to sums payable by the employer as a matter of legal obligation where that obligation arose simply because the employee has worked their normal working hours in a week; while this clearly applied to the Claimants' basic pay, it did not apply to the profitability bonus. Accordingly, a declaration would be substituted that, on the true construction of section 221(2) of ERA, the profitability bonus did not fall to be included in the calculation of a week's pay in the present case.

Read the full text of the judgment on BAILII or download the file by clicking the link below.