[Thanks to Ed McFarlane of Deminos HR for preparing this case summary]
When a pilot is on holiday, should holiday pay be calculated from basic salary, or should the calculation include allowances on top of basic salary?
After a reference by the Supreme Court in the cases of Williams & Others v British Airways plc the answer to the question that landed at the European Court of Justice "ECJ" is that generally, allowances must be included in holiday pay where they relate to "any inconvenient aspect" intrinsic to the performance of the job, e.g. a flying allowance paid to a pilot, whereas an allowance for occasional or ancillary costs, e.g. an allowance for time spent away from the pilot's base (but not working) might not need to be taken into account for holiday pay. However, pay during leave should be comparable to pay during periods of work.
The ECJ was concerned that if employers only pay basic salary for annual leave, the prospect of losing pay could deter people from taking annual leave, which would be contrary to the social policy of encouraging people to take leave.
The ECJ left the question of which elements of pay should be incorporated into holiday pay to be determined by the national Court.
The ECJ was considering a question arising from The Civil Aviation (Working Time) Regulations 2004, which cover aircrews, implementing the sector-specific provisions relating to Working Time. However, the Judgment may have broad implications for calculating holiday pay for workers where task-related allowances form part of remuneration.