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Voluntary overtime to be included in holiday pay

The Employment Appeal Tribunal has decided that voluntary overtime should be included in holiday pay calculations. Up until now, it was only compulsory and non-guaranteed overtime that had to be included and many employers were waiting to see what the ruling was before including voluntary.

This only needs to be included in the first four weeks of holiday pay in an annual leave year and does not extend to all voluntary overtime only work that “extends for a sufficient period of time on a regular and/or recurring basis” and has become part of ‘normal’ pay. There is no statutory definition of normal pay and there will still be arguments over whether some examples of overtime can be defined in this way.

If you are now calculating holiday pay and weekly pay varies from week to week, you need to calculate average pay over the 12 weeks immediately prior to the holiday being taken, to determine how much holiday pay the employee is entitled to. This should include overtime and other regular payments connected to their work.

The case in question was Dudley Metropolitan Borough Council v Willetts. The 5 lead claimants who did housing repairs for the council claimed unfair deductions from wages because their employers were not including voluntary overtime, voluntary standby allowance and voluntary call out payments in holiday pay. The Judge agreed with their arguments that their decision to work over time was at the ‘whim of the employee and entirely voluntary’ but given the regularity of this overtime it constituted their normal pay and therefore should be included when they are on holiday. 

  Empire can assist you with issues relating to holiday pay. Please call 01224 701383

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