Voluntary overtime must be included in holiday pay
Following the recent decision of Dudley Metropolitan Borough Council v Willetts, the Employment Appeal Tribunal (EAT) has now ruled that voluntary overtime should be included in holiday pay.
Previous case law in this area stated that the holiday pay that an individual should receive must reflect their normal remuneration. As voluntary overtime was not contracted, parties argued that voluntary overtime did not amount to ‘normal remuneration’, as stated in their employment contract. This has now changed due to the Employment Appeal Tribunal rejecting the argument put before them, on the basis that to exclude these payments would inevitably leave the worker at a financial disadvantage, which may lead to workers being deterred from taking any annual leave.
The case referenced the EU Working Time Directive, which states that holiday pay is calculated by reference to what the worker would normally be paid; previously construed as their contracted hours. However, by looking at the facts of the case, the tribunal found that if overtime is performed and paid with significant regularity, it is to be construed as being part of the normal remuneration that workers should receive. In short, ‘normal pay’ is what the worker ‘normally receives’.
The Employment Tribunal (ET) stated that if the tribunals were to take the above approach, they were blurring the lines between completely voluntary overtime and a workers’ voluntary participation in rotas. The latter would not constitute completely voluntary overtime due to the fact that once the worker’s name was on the rota; they were expected to attend work if asked. They would then only be paid for the inconvenience of working out of hours, rather than working in a completely voluntary capacity (whereby they would be able to determine the hours in which they worked above their contracted hours).
The Employment Appeal Tribunal (EAT) however disagreed and solidified their stance on the fact that voluntary overtime will only be included in holiday pay if it can be proven that it amounts to regular payments over a significant amount of time. This factual burden will be for the worker to prove and above else, the worker will have to prove that the remuneration they receive directly correlates to the work they have carried out.
If you have any questions in relation to the new rules regarding holiday pay and voluntary overtime, contact Millie Kempley or a member of the EMW Employment team on 0345 070 6000, who will be able to assist you with any queries you may have.