This is a cross-posted article, originally written on the Pure Employment Law Website and has now been posted here. Please note the date on which this article was posted originally and that any information within may have changed.
29th May 2015
It may sound like a simple question, but a recent case went all the way to the Court of Appeal dealing with how a day’s pay should be calculated.
The reason the case of Hartley and others v King Edward IV College (2015) came about was that the Claimants went on strike for one day. The College deducted one day’s pay from their wages which it had calculated at 1/260 of their annual salary. This was based on the fact that the teachers’ contracts stated that they worked Monday to Friday (5 days per week for 52 weeks per year = 260 days).
The Claimants accepted that the College was entitled to deduct a day’s pay, but they argued that the calculation should have been based on 1/365 rather than 1/260. This was because of the Apportionment Act 1870. In particular, the Claimants argued that as teachers, a lot of their working time was done outside their working hours and therefore their hours did not necessarily accrue in the way suggested by the College.
Under the Apportionment Act, there is a principle of equal daily accrual, i.e. that salary should accrue by equal amounts on each day of the year. The Act contains the ability for the parties to contract out of these provisions, but that had not happened in this case.
The Court of Appeal came to a unanimous judgment that 1/260 was the correct decision in this case. It found that the Apportionment Act 1870 did apply, but that this did not necessarily mean that 1/365 would be appropriate, as the Act did not specify the rate or the manner in which salary accrued daily.
The Court of Appeal found that the appropriate rate of accrual is established by the contract terms while taking account of the effect of the provisions of the Act. If this meant that the better approach was 1/260 rather than 1/365, that should be the rate applied. This would be the case even if the contract did not specifically exclude the Apportionment Act. However, the principle that accrual would be on an equal daily basis (i.e. 1/365) would apply in the absence of anything in the contract to the contrary.
In relation to the time spent working outside their contracted hours, the Court held that was ancillary to their main teaching work, and that therefore calculating a day’s pay using the total working days in the year (including days which were paid holidays) was a reasonable approach for the employer to have taken. The Claimants therefore failed in their appeal.
Many employers reading this will be thinking that they would have used 1/260 as a matter of course anyway – and this is certainly common practice in most of the situations we have come across. It also falls in line with the usual approach for calculating a day’s holiday pay. It is however worth noting the Court of Appeal’s comments that 1/365 will be the default approach unless there is something in the contract to the contrary. If in any doubt as to whether your contracts do this, it is best to take advice.