Holiday Pay and Voluntary Overtime

Is pay for voluntary overtime, normally worked, ‘normal remuneration’ for the purposes of calculating holiday pay?

Yes, held the EAT in Dudley Metropolitan Borough Council v Willetts.

The Employment Appeal Tribunal in this recent decision has held that payments for voluntary overtime that is normally worked must be included when calculating holiday pay for the first four weeks of holiday provided by EU law and the Working Time Regulations.

In its decision, the EAT explained that as holiday pay must correspond with “normal remuneration”, any voluntary overtime payments that are paid over a sufficient period of time on a regular basis fall within this definition.

In general, workers should receive the same pay while they are on annual leave as they normally receive while they are at work. The concern is that if they didn’t then workers may be deterred from taking leave because they are paid less while they are on leave.

This decision only applies to the 4 weeks of annual leave required by the EU Working Time Directive. However, employers may choose to apply the judgment to the 1.6 weeks of annual leave required by UK law.  Some employers may also apply this judgment to the additional amount of leave over and above the 5.6 weeks, that also forms part of the workers contract.  Doing this is not a legal requirement but can help to keep the employer’s processes simple and understandable.

Unfortunately, the EAT in its judgment offered little by way of further guidance on what level of regular or frequent overtime is required in order for a payment to qualify as “normal remuneration”. Therefore, this is a question which employers and future Tribunals are left to grapple with and as a result a good deal of uncertainty remains.

For Employers

As an employer if you have any queries about how to calculate holiday pay and entitlement for your workers then please contact our specialist employment law team by email to reyhana@bradleyhayneslaw.co.uk or by telephone on 01905 900919. 

For Employees

If as a worker you believe that you have not received the correct holiday pay and want to know if you are entitled to unpaid holiday pay then please contact our employment law team on the details mentioned above.

Please note that in light of the recent Supreme Court decision an individual can now raise an employment tribunal claim without having to pay a fee and therefore there is a likelihood that there will be an increase in employment tribunal claims over the next few months.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at 23 August 2017. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.