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Holiday pay includes regular voluntary overtime

Posted on 13th September 2017
Case law

The Employment Appeal Tribunal (EAT) has (unsurprisingly) upheld an employment tribunal’s decision that voluntary overtime payments to certain employees should be included in the calculation of holiday pay.

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Julie Temple Julie
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Dudley Metropolitan Borough Council v Willetts and others [EAT] 2017

The Facts

We reported on the employment tribunal decision back in 2016. 

Briefly, five employees employed by Dudley MBC challenged the pay they received when on holiday.  They were employed in various roles and received various payments for being on call and when called out in addition to overtime payments and their basic pay. 

The employees volunteered to be on the 'on call roster' and had carried out on call duties for a number of years. They could come off the on call roster but when it was their on call shift had to attend any emergency that arose. They were on call either 1 week in 4 or 1 week in 5.  When on call they received a payment for being on call, being called out and, in some instances, a travel allowance which exceeded the costs incurred when travelling for work.  Part or all of the travel payment was taxed.

Some of the employees worked overtime but were not required to under the terms of their employment.  Overtime ranged from 1 or 2 additional hours per week to one day per week to 'very rare'.  There were no ramifications if the employees did not work this overtime.

The employment tribunal decided that out of hours standby payments, call out allowances and taxable elements of travel allowances which exceeded actual costs incurred should be included in the calculation of the statutory entitlement to four weeks' annual leave. It also decided that the employees who worked voluntary overtime regularly should have four weeks' annual leave calculated to include these overtime payments.

The Decision

The EAT agreed with the employment tribunal.  Although voluntary, in the sense that the employees were not contractually required to be on call or do overtime, where the payments were paid over a ‘sufficient period of time on a regular and/or recurring basis to justify the description “normal”’ pay they should be taken into account in the calculation of the four weeks’ annual leave.

In Practice

The EAT, like the employment tribunal, steered clear of giving any guidance about what period or what is meant by regular or recurring.  This will be a question of fact for the employment tribunal to decide in each case, but the wording is sufficiently broad to include seasonal or other time specific peaks in requirements. 

The case may well be appealed, given the above was a test case for 56 employees at Dudley (but any appeal is unlikely to be successful).  The decision follows a number of holiday pay cases which provide there should be no difference in pay during a period of work when compared to a period of holiday. 

If a review of how you calculate holiday pay is still on your to do list or if you have any employees or workers who carry out overtime, you should now be looking at the pattern of work and pay and considering whether it could fall within what is regular and if the calculation of holiday pay needs to be adjusted.  Employers also need to consider if any retrospective payments should be made or at least have an approach in mind if an employee or worker raises the issue.

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