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Employment Law

Legal guidance - compliance - software

Veale Wasborough Vizards , 05 SEP 2016

Should voluntary overtime be taken into account when calculating holiday pay?

Should voluntary overtime be taken into account when calculating holiday pay?
Nick Murrell
Solicitor, Veale Wasbrough Vizards

In Brettle v Dudley Metropolitan Council the Employment Tribunal held that, provided payments for voluntary overtime were 'intrinsically linked to the work performed' and were 'paid in such a manner, and with sufficient regularity to be considered a part of normal remuneration', then they should be included in holiday pay.

Background

Brettle follows a number of high-profile holiday pay cases which have clarified the payments that workers should receive during annual leave. As a starting point all workers are entitled to be paid annual leave. Regulations require workers to be paid a week's pay in respect of each week of leave. The European Court of Justice confirmed in the case of Williams v British Airways that holiday pay must correspond with 'normal remuneration'. Recent case-law (such as Lock v British Gas) has therefore explored what payments should properly be included as 'normal remuneration' and has confirmed that bonuses, commission and shift premium should all be reflected in holiday pay.

In Bear Scotland the Employment Appeal Tribunal held that non-guaranteed overtime (overtime that the employer is not obliged to offer but which the worker is contractually required to work if requested) also amounts to 'normal remuneration'.

One question that remained from these cases was whether voluntary overtime would amount to 'normal remuneration'. Voluntary overtime is overtime that the employer is not obliged to offer and which the worker is not contractually required to work if requested. In Patterson v Castlereagh Borough Council the Northern Ireland Court of Appeal held that voluntary overtime should be included in holiday pay provided it amounts to 'normal remuneration'. This case was, however, not binding on English tribunals and gave no guidance on the tests that will be applied to determine whether voluntary overtime will amount to 'normal remuneration' in any given case.

All of which led to the Employment Tribunal decision in Brettle.

Decision

The Employment |Tribunal held that voluntary overtime, together with voluntary out of hours standby time and related call out payments, were capable of being normal pay provided they were intrinsically linked to the work performed and paid with sufficient regularity.

Best practice

Although this is a decision of the Employment Tribunal, and not therefore binding, it will be persuasive and very much in line with recent case-law in relation to holiday pay. Employers will need to be comprehensive in monitoring the payments that staff regularly receive and ensure that holiday pay corresponds with normal remuneration. They will also need to consider that, even where workers are performing overtime on a voluntary basis, this will impact upon holiday pay.

Importantly, these principles only apply to leave under reg 13 of the Working Time Regulations 1998 (the entitlement to 4 weeks' annual leave which flows from EU law). Workers in the UK are entitled to an additional 1.6 weeks' annual leave under reg 13A of the Working Time Regulations 1998 to which these principles do not apply. Employers may, however, find that it is too administrative difficult to operate two different holiday pay calculations depending on the type of leave taken.

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