It has been established for some time that compulsory overtime should be included in assessing a “weeks’ pay” for holiday pay purposes (following the Bear Scotland decision). The position in relation to voluntary overtime has been less clear and open to speculation. The Employment Appeal Tribunal (EAT) has now confirmed that, as holiday pay must correspond with “normal remuneration”, any voluntary overtime that is made sufficiently regularly to fall within this definition should be included. Unfortunately, this does not give a clearly defined rule as it will inevitably be a question of fact and degree as to whether the payments have been made with the requisite sufficient regularity. It is however clear that voluntary overtime cannot be ignored.
In Dudley Metropolitan Borough Council v Willetts, 56 employees who carried out housing maintenance for the Council claimed that they had not received the correct payments for their holiday pay. The overtime being debated was purely voluntary and could not be enforced by the employer, but both the Tribunal and the EAT found that the payments were made with sufficient regularity for it to be part of “normal remuneration”. If it was not included, some employees may be deterred from taking holiday because of the reduced pay.
The requirement to include these payments only applies to the 4 weeks’ paid holiday that derives from EU law and not the additional 1.6 weeks that the Working Time Regulations allow for. Employers need to, once again, revisit holiday payments and where voluntary overtime payments are made, assess whether they are made with sufficient regularity to be part of “normal remuneration”. The dividing line will not always be simple to judge.
This decision will bind subsequent Employment Tribunals (unless it is successfully appealed).