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Voluntary overtime should have been included in calculation of statutory holiday pay

Judgment has been given in the latest case to deal with the calculation of holiday pay.

The Employment Tribunal in Brettle v Dudley Metropolitan Borough Council has held that voluntary overtime should have been included in the calculation of statutory holiday pay. Employment Tribunal decisions are non-binding; however, the decision serves as a useful (and not unexpected) indication of the approach that Tribunals may take in relation to voluntary overtime.

There have been a number of widely-reported cases in recent years in relation to the calculation of holiday pay. It is now accepted that an individual’s holiday pay should represent their “normal remuneration” and an employee should not be deterred from taking annual leave by receiving less than “normal” pay. What constitutes “normal remuneration” has been the subject of much debate.

It is an established principle that guaranteed overtime should be included in the calculation of holiday pay and, following the important case of Bear Scotland Ltd v Fulton and others, non-guaranteed overtime (where the employee is obliged to work overtime if required, but the employer is not obliged to provide it) is also included. There has been much debate as to whether voluntary overtime which an employee regularly works should also be included in the calculation.

In Brettle, 5 lead claimants (in respect of 56 employees) brought a claim for unlawful deductions from wages, arguing that the calculation of their holiday pay should have included an amount in respect of voluntary overtime, voluntary standby allowances, voluntary call-out payments and mileage payments.

The five employees worked different shift patterns and worked overtime with varying degrees of regularity. One employee worked voluntary overtime once in every four weeks, another once in every five, another more rarely. The employees all voluntarily signed up to rotas where they had to be on standby and might be called out.

The standby allowances, call-out allowances and overtime were in relation to voluntary work. However, the Tribunal concluded that failing to include them in holiday pay where the employees received them consistently and regularly might deter them from taking annual leave. Although the rotas in question were voluntary, once an employee’s name was on the relevant rota, they were required to attend the workplace (or in the case of standby, be available). The Tribunal therefore held that the payments were “intrinsically linked” to the work which the employees were contractually obliged to do. With regard to additional voluntary overtime, the Tribunal held that where overtime was regularly worked, this should have been included in “normal pay”. In one claimant’s case, however, the voluntary overtime was very rare and so the Tribunal held that it should not be included.

A further decision is expected in this case in relation to the amount of money that the claimants should receive as a result of their unlawful deductions claim, which should provide further guidance as to how these cases will be dealt with.

There will undoubtedly be further cases on this topic to come and, pending a decision of the Employment Appeal Tribunal (or other higher court) the position in relation to voluntary overtime and holiday pay is still not clear-cut, albeit it is becoming clearer. 

This bulletin is for general guidance purposes only and should not be used for any other purpose.

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