ESM2380 | Agency and temporary workers: overarching contracts of employment - miscellaneous contractual issues

Apportionment Act 1870

Many contracts purporting to be overarching contracts of employment may include a clause which provides that “The provisions of the Apportionment Act 1870 shall not apply to this contract”.

The Act itself is not directly concerned with any obligation to provide work. It is concerned only with the right to a salary and its deemed accrual on a day to day basis. Accordingly, applying or disapplying the Act does not create an obligation on an employer to offer work. It has nothing to do with an obligation at all.

Holiday pay

Workers, including agency workers and casual workers, have a right to paid leave under the Working Time Regulations. Holiday entitlement is calculated in accordance with the Employment Rights Act 1996.

In relation to overarching contracts of employment, holiday pay is not a consideration in determining whether there is an obligation on the part of the employer in the gaps between assignments.

If a contract is an overarching contract of employment, then the worker’s holiday pay entitlement should be calculated on the basis that they are employed under a single contract of employment which covers a series of separate assignments i.e. the worker effectively becomes an employee for the whole of the period covered by the overarching contract of employment, including periods covering any gaps between assignments.

Where an overarching contract of employment has correctly been implemented, then employers should not be calculating holiday pay as if the worker were engaged on a job by job or assignment by assignment basis.

Where it is claimed that an overarching contract of employment is in place and it is subsequently identified that an employer has calculated holiday pay on a job by job or assignment by assignment basis, then the employer should be asked to provide a full and detailed explanation as to the reasons why holiday pay has been calculated in that manner.

The fact that an employer is or has paid holiday entitlement on a job by job or assignment by assignment basis, may be a pointer suggesting that the contract is not an overarching contract of employment. Equally, it may be that the employer has genuinely made an administrative error in calculating holiday pay entitlement. It is important to establish the facts.

The Department for Business Innovation and Skills (BIS) is responsible for legislation in relation to the entitlement and calculation of holiday pay. An employer should be advised to contact BIS if they have any queries in relation to the entitlement and/or calculation of holiday pay.

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Entire agreements

An employer or their representatives may claim the contractual provisions represent the entire agreement and that HMRC should not be looking outside those contractual provisions.

Where it becomes necessary to test a contract you should establish if there are any terms and conditions outside of the contractual provisions - for example, other written documentation, any oral or varied terms. You should also establish and obtain evidence as to how the written provisions operate in practice.

If an employer and/or their adviser suggest HMRC should not be looking beyond the contractual provisions i.e. what happens in practice, you should refer to the comments of Smith LJ in the Court of Appeal case Autoclenz Ltd and Belcher & Ors [2009] EWCA Civ 1046. See the commentary at ESM7310. The Court of Appeal judgment was upheld by the Supreme Court - Autoclenz Ltd v Belcher & Ors [2011] UKSC41.