CLAUSE 91.—(Amendments as to preferential payments.) (Hansard, 28 July 1947)

§ The Solicitor-General
I beg to move, in page 82, line 16, at the end, to insert: (4) For the purposes of the said sections two hundred and sixty-four and two hundred and ninety-eight any remuneration in respect of a period of holiday or of absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period. (5) The debts which are to be paid in priority under the said section two hundred and sixty-four shall include all accrued holiday remuneration becoming payable to a clerk, servant, workman or labourer (or in the case of his death to any other person in his right) on the termination of his employment with the company before or by the effect of the winding up order or resolution; and in relation to any sums payable in priority by virtue of this subsection, subsection (3) of the said section two hundred and sixty-four and paragraphs (3) and (5) of the said section two hundred and ninety-eight shall apply as they apply in relation to wages. (6) For the purposes of this section—

(a) the expression "accrued holiday remuneration" includes in relation to any person, all sums which, by virtue either of his contract of employment or of any enactment (including any order made or direction given under any Act), are payable on account of the remuneration which would in the ordinary course have become payable to him in respect of a period of holiday had his employment with the company continued until he became entitled to be allowed the holiday; and

(b) references to remuneration in respect of a period of holiday include any sums which, if they had been paid, would have been treated for the purposes of the National Insurance Act, 1946, or any enactment repealed by that Act as remuneration in respect of that period."

This Amendment is designed to meet a point made by two of my hon. Friends—the hon. and learned Member for Kettering (Mr. Mitchison) and the hon. Member for Harborough (Mr. Attewell) during the Committee stage. What they proposed and what we feel in a position to 205 accept is that among the debts which should be given priority in the winding up of a company should be included money payable in respect of holidays, money in respect of absence from work and other similar cases, and also what is known as accrued holiday remuneration payable in statutory and contractual holiday schemes. The first part of the proposal is really only drafting in the sense that it should be said that where a person is absent from work and does not as a result render any service to his employer, the money payable to him under a contract during his illness is not money within the provisions of Section 264 of the Companies Act, 1929. The same can be said concerning money paid in respect of a holiday which he has already had. We are seeking to make clear in both those cases that in cases in which the employee is paid money for which he was not rendering a service, the money should be regarded as payable in respect of services within the meaning of Section 264 of the Act of 1929, so that that part of the Amendment is really drafting.
The second part, Subsection (5), is more than drafting. This brings into the scope of priority debts, accumulated holiday payments, that is, payments which fall to be made to an employee in respect of a holiday he is entitled to take under terms of various statutory holiday schemes such as under the Catering Wages Act, 1943, the Holidays With Pay Act, 1938, the Road Haulage (Wages) Act, 1938, and similar acts, and also in cases where, under the terms of his contract, there is a fund set aside to provide him with certain payments in respect of a period in which he is held to be on holiday. The Amendment is designed to meet those points and was supported generally by both sides of the Committee.

§ Major Haughton (Antrim)
May I make the point that in the case of those holiday funds, the question of making them priority does not arise?

§ The Solicitor-General
Various schemes are possible. We have sought to include those under which certain payment is due and is held for the employee when his employment terminates. There are certain funds set aside under terms of a trust and that type would not be included, because it is not practicable to include it as the 206 employee has no claim to a specific portion of the fund. We are therefore limiting it to specific cases. We have brought in the ones which we think are practicable to bring in, and to leave out the others which we think it is not practicable to bring in.

§ Major Haughton
But the point is this: whether it is under a statutory scheme or under "a trustee scheme, that particular money is set aside and is not part of the funds of the company.

§ The Solicitor-General
In some cases it is and in some cases it is not. Where it is possible we have brought it in. Otherwise it has not been practicable to do so.

§ Sir H. Lucas-Tooth
I think I am speaking for those who sit on these Benches when I say that we welcome the general principle of this Amendment, though its effect will not be quite so extensive as one might suppose. In the ordinary way, it will not give to the employees the same benefit as it will to the banks and other institutions, which can be prevailed upon to advance money to a company which is in difficulties in order to enable it to continue to pay its workmen and to meet those other sufficient awards to induce them to continue in the company's employment. In effect, we are considering the position of the creditors of a company in liquidation and we are inclined to look at the provisions of an Amendment of this sort somewhat narrowly, so as to see that it does not give anything in the nature of an unfair priority. There is one question which I should like to ask the Government. As I understand it, the first paragraph of the Amendment is only intended to deal with the case where there is due money for holidays which have actually been taken; that is to say, where money has already probably been earned, the period of holidays being regarded as a general period of service by a servant of the company.
When we come to the next part, the position is not quite so clear. As I understand it, where there are holidays due to a servant of a company, although he has not taken them, they may be said to be already due when they are provided under some statutory scheme. This paragraph is limited to statutory schemes, though 207 it covers any case where an accommodation has been made between the employee and the company. I can imagine that an abuse of that kind could ensue. Where a company was in difficulties it would be possible for it to come to terms quickly with either some specially favoured employees or perhaps with all employees, so that they could get a somewhat longer period than they were otherwise accustomed to. In that way the company would be enabled to give special advantage to those which had been working for it as against the normal trade practice. I am a little apprehensive that this may be the effect. I am sure that the Government did not intend it that way, but, in any event, I should like to have an assurance that it will not be operated in that way.

§ Mr. Mitchison (Kettering)
I should like to thank the Solicitor-General for presenting this Amendment, which meets our views on this side of the House. Our knowledge of the need of such an Amendment was founded in one case on actual facts. As regards the difficulty which has been suggested by the hon. Member for South Hendon (Sir H. Lucas-Tooth), to me such a case seems an improbability, and I think we should wait until we have actual experience of one such case.

§ Mr. Attewell (Harborough)
At this time of the morning very few words are required from me. but I should like to associate myself with my hon. and learned Friend the Member for Kettering (Mr. Mitchison). This is of importance today, because there are so many industries with holiday provision schemes. It is true that those schemes vary but in the main one can say that the year is split up into so many parts and the operative who is working is credited with one forty-eighth or one-fiftieth part of the year. In my own particular industry, which some hon. Members may knew has a record in this method of holiday payments there was a deduction made from the wage packets of the operatives Week by week. The manufacturer pays his employees and those payments go into a general holiday fund. Nevertheless, to the firms in bankruptcy the employees' portion has been regarded as wages to them. Consequently, the payments ranked with other profits and the employers' share was not paid out. I 208 am, therefore, sure that this proposal will be a help to all concerned.

§ The Solicitor-General
I think it is most unlikely that there would be any dispute in view of impending liquidation of companies in difficulties, or that companies would hurriedly set up claims with a view to providing for paying employees or to get preferential payments in respect of holiday payments. The likelihood of this being abused is, I think, next to nil.

§ Mr. Belcher
I beg to move, in page 82, line 34, to leave out "(3)," and insert "(6)."

§ Mr. Belcher
This Amendment is purely drafting. The one which follows is to accord to employees of a company, in cases where a receiver has been appointed under debenture security in charge of the company's property, the same rights as regards holiday remuneration as are accorded by the Amendment to page 82, line 16.