The Employment Appeal Tribunal (EAT) recently considered this question in the case of De Mello v British Airways Plc. The decision they reached carries significant implications for employers regarding the inclusion of meal allowances in holiday pay calculations.
Understanding the Tribunal’s Decision
The Employment Appeal Tribunal suggested that meal allowances could indeed be included in statutory holiday pay calculations. According to the Tribunal, any payments that are connected to the performance of an employee’s duties should be included in SHP. However, occasional or ancillary costs do not need to be incorporated.
The Case of British Airways’ Meal Allowance
In this particular case, British Airways provided a flat-rated meal allowance to its cabin crew. The primary reason for the allowance was to simplify the handling of multiple meal receipts each day. Both employer and employee acknowledged that the set allowance exceeded the annual cost of meals. The Employment Tribunal initially found that the meal allowance, or a pro-rata amount, should be included in the calculation of holiday pay since it was directly related to the execution of duties - and not intended for occasional or ancillary costs.
The Appeal and Its Implications
The EAT held that the initial decision incorrectly placed the burden on the employer to prove the relevance of the set meal allowance. Instead, it was the Employment Tribunal’s responsibility to assess all relevant factors and decide whether the meal allowance should be included in holiday pay calculations.
The matter was remitted back to the Employment Tribunal. Initially, the ET ruled that any gap of three months or more between deductions would break the chain of causation, based upon the Bear Scotland v Fulton case. However, this conclusion was later found to be incorrect in light of the Supreme Court’s decision in Agnew.
What was the Final Ruling?
The EAT concluded the meal allowance deductions were sufficiently similar to be considered a sequence of payments. This sequence related to deductions from holiday pay, establishing a link between the deductions. The Tribunal directed that there will always be gaps between holiday periods, but these should not break the chain of causation.
What Should Employers Do?
Given this decision, it is imperative for employers to urgently review and update their policies and procedures regarding the calculation of statutory holiday pay – particularly those who offer some form of meal allowance. Ensuring your compliance with the latest rulings will help avoid potential disputes and financial liabilities.
This article serves as guidance only and does not constitute professional legal advice. If you need further assistance with this issue, please contact our HR and Legal Advice Line Team for FREE on 01455 852 028.
