This recently reported case concerns the correct calculation for ‘frozen holiday pay’.  Ms Ritchie worked for Stewarts Supermarkets Ltd (SSL) from 1988 and in 1998 the Company was acquired by Tesco.  Ms Ritche had accrued 25 days holiday pay under the Stewarts Supermarkets scheme and upon transfer to Tesco these days were ‘frozen’ and employees were told that they would receive  payment for these days upon termination of employment at the rate they are then paid.

As part of a move from weekly to monthly paid the Respondent permitted affected employees to ‘cash in’ part of the their frozen holiday leave.  Ms Ritchie sought to do this and sought information on the value of her frozen leave.  She was told that she had 25 frozen days which equated to £1548.25 based on her currently hourly rate of pay.   The Claimant expected to receive £625.60 when she used 2 weeks of this frozen leave. She only received £385 as the respondent based the calculation on her current weekly hours of 24 rather than the 39 she had been working when she accrued the leave.

The tribunal found that the frozen holiday pay amounted to an ‘inherited debt’ for the Respondent when it had acquired Stewarts Supermarkets Ltd.  The Claimant therefore should have been paid for the full 10 days (2 weeks) worked under her previous contact with SSL not the 8 days under her current contract.  They awarded the sum of £240.60 to represent the difference between what she was paid and what they deemed she should have been paid.

Practical Lessons

An accrued holiday system was common prior to the introduction of the Working Time Regulations in 1998 and many organisations moved to a current year system at this time and ‘froze’ the accrued leave, agreeing to make a payment for this upon termination of employment.   Readers may wish to check their policies to determine what the agreed payment would be for this frozen leave.

This case review was written Legal Island.  NI Tribunal decisions are available on the OITFET website:
http://www.employmenttribunalsni.co.uk/