The Employment Appeal Tribunal (EAT) has confirmed payments for purely voluntary overtime must be included in an employee’s holiday pay if they are regular enough to constitute to ‘normal pay’.
A large amount of employers have never included working voluntary overtime in holiday pay. This decision will have a positive impact on many workers. The decision will also give clarity to employers and their staff members as employment tribunals have seen thousands of cases dealing with similar issues.
In the case of Dudley Metropolitan Borough Council v Willetts (and others) the EAT stated voluntary overtime worked for a sufficient amount of time on a recurring/regular basis should be included in the employee’s first four weeks paid holiday.
Holiday pay claims were brought against the Council by 56 employees who were responsible for the maintenance and repair of council houses. They worked a set number of hours per week which were classed as their ‘normal working hours’. However, they would also work additional voluntary hours and were on an on-call register once in every four/five weeks. The employee’s additional hours were never included in their holiday pay. The workers argued that this was against the Working Time Regulations 1988.
The Employment Tribunal (ET) originally dealt with the case first and ruled in favour of the claimants. However, Dudley Metropolitan Borough Council appealed the decision to bring the case to the EAT. The case was then dismissed due to the EAT agreeing with the ET.
The EAT had rejected arguments relating to normal weekly pay for the workers in the ‘Dudley Metropolitan Borough Council v Willetts’ case. This is because it didn’t include voluntary overtime since their overtime was only worked once in every four/five weeks and not classed as their normal working pattern.
Not all voluntary overtime has to be included in holiday pay as irregular overtime wouldn’t be included. However, if an employee is working overtime on a regular/recurring basis for a long period of time, their extra hours will be included in the worker’s normal pay. Employees who also work overtime frequently at certain times of the year like Christmas will also have the additional hours added to their normal pay.
There isn’t a statutory definition of what amounts to ‘normal’ pay’. Tribunals still continue to hear cases on whether overtime is included in an employee’s normal pay.
Employers are expected to work out an employee’s holiday pay if their normal pay varies each week. The employer will have to average their pay for the previous 12 weeks. Working this out will have to include any voluntary overtime worked and any other regular payments linked to work. However, this only related to an employee’s first 20 days’ leave taken in each holiday year and not to additional statutory pay or contractual leave.
If you would like advice on employee’s voluntary working overtime, please contact a member of the HPC team on 0844 800 5932 or email: firstname.lastname@example.org