In Brettle v Dudley Metropolitan Borough Council, the Employment Appeal Tribunal considered whether voluntary overtime should be included in the calculation of statutory holiday pay.

This was a case brought against Dudley Metropolitan Borough Council (the Council) by five lead Claimants on behalf of 56 other employees

The employees had received holiday pay, but put forward arguments in Tribunal that they had not received the correct rate of pay. The employees argued that there had been a failure when calculating their holiday pay to include amounts in respect of voluntary overtime, voluntary standby allowances, voluntary call-out payments and travel allowances which they would have received had they been in work.

The five lead Claimants all worked different shift patterns, and undertook different amounts of voluntary overtime and the frequency which they worked voluntary overtime also varied. Some of lead Claimants worked voluntary overtime once in every four weeks, others once in every five weeks and other less regularly again. They had also participated in 'on-call rotas' to different extents.

In order to reach its decision the Tribunal considered Working Time Directive and the Working Time Regulations 1998 which implemented the Directive into UK law. Under the legislation, workers are entitled to be paid at the rate of a 'normal weeks pay' for each week of holiday.

What amounts to a normal weeks pay is calculated in accordance with the Employment Rights Act 1996 under which a distinction is made between employees with 'normal' and 'no normal' working hours.

The Tribunal also considered the existing case law in relation to holiday pay with a particular focus on the three cases of Williams, Bear and Patterson, which we summarise below as a useful recap of where the current case law on holiday pay has reached.

  • In Williams & Others v British Airways, the European Courts of Justice held that a worker is entitled to not just basic salary, but also remuneration that is 'intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment and in respect of monetary amounts, included in the calculation of his total remuneration'
  • In Bear Scotland Ltd v Fulton & others, the Employment Appeal Tribunal (EAT) considered the regularity of payments and found that certain payments which were paid in such a manner, with sufficient regularity, could be considered part of the employee's normal remuneration. It concluded 'that which is normally received is normal remuneration'
  • In Patterson v Castlereagh Borough Council, the Northern Ireland Court of Appeal held that there is no reason, in principle, why voluntary overtime should not be included in the calculation of statutory holiday pay. Whilst this was a decision in relation to applied to the Working Time Regulations (Northern Ireland) 1998, these are substantively the same as the Working Time Regulations 1998.

Having regard to all of the factors set out above, the Tribunal concluded that the majority of the additional elements should be included in the Claimant's holiday pay. Specifically:

  • The out of hours standby payment – Here, the Tribunal concluded that this element of pay should be averaged out on an individual basis (to accommodate some employees being on-call one week in four and other less) but that iy was a part of normal pay and so should be included in holiday pay calculations
  • The call out allowance – The Tribunal didn't comment on how this should be calculated for holiday purposes but was satisfied that, whilst this element of pay related to a voluntary rota, for those on the rota it was a normal part of their pay and holiday pay should reflect what is normally received, so it should be included in holiday pay calculations
  • Travel allowance – In this case, the allowance went beyond mere reimbursement of expenses and the Tribunal found that the element of the allowance that was subject to tax as a benefit in kind was part of the Employee's normal pay and so should be included in holiday pay calculations
  • Voluntary overtime – Here, the Tribunal referred to the case of Williams. It was found that some of the Employees undertook regular voluntary overtime which should be included in holiday pay calculations. However other Employees either did not undertake regular overtime or undertook voluntary overtime so infrequently it could not form part of their normal pay and so should not form part of holiday pay calculations.

The Tribunal went on to clarify that its decision only applied to the 4 weeks of holiday leave provided for by Regulation 13 of the Working Time Regulations. The calculation of holiday pay in respect of any further leave (whether it was the additional 1.6 weeks provided for under Regulation 13A, or an enhanced contractual entitlement), would only need to include regular pay plus any element of agreed contractual overtime.

For employers where this may result in a difference in holiday pay, depending on whether the employee is taking their 4 weeks of Regulation 13 leave or the 1.6 weeks leave, there was a strong steer that it was the first 4 weeks of holiday taken by an employee in any given leave year that should be treated Regulation 13 leave.

It is important to note that this is not a binding decision. However it clearly demonstrates the direction of travel in the holiday pay cases.

As always, each case will turn on its facts. Amongst the lead five Claimants, not all of them were successful on all elements of pay that they had argued should have been included in holiday pay calculations as, whilst the other may have been successful, they were not able to demonstrate the payments formed part of their own normal remuneration.