The Employment Appeal Tribunal has decided that if employees are paid for overtime, this should be taken into account when paying holiday pay. This includes any shift premiums and allowances paid with the overtime. This could be a considerable burden for employers, especially if the overtime is controlled by the employees.
Five steps to consider are:
- Is the overtime paid, if so, at what rate?
- When the overtime is worked, is the employee performing the same tasks as under their contracts?
- How can the overtime be controlled? Is it approved in advance? Who approves it? Can it be worked when a basic rate applies rather than an enhanced rate?
- How is the overtime recorded and communicated to payroll?
- Are there patterns when overtime is worked, for example every day, at month end, at the start of a project? Does this make it ‘normal’ or a one-off?
Identifying ‘normal pay’ and the appropriate look-back period to apply can be difficult. Get in touch if you’d like to discuss your situation and options.