In the latest in a number of cases dealing with the calculation of holiday pay, the Employment Appeal Tribunal (“EAT“) has held, in the case of Dudley Metropolitan Borough Council –v- Willetts, that pay for voluntary overtime normally worked constitutes “normal remuneration” for the purposes of calculating holiday pay provided for in the Working Time Directive (20 days).

The EAT rejected Dudley Council’s restrictive interpretation of the recent seminal cases of Williams and Lock. Dudley Council sought to argue that these cases demonstrated that the overtime payments were not “normal remuneration” because they were not intrinsically linked to the performance of the tasks the Claimants in this case were required to carry out under their employment contracts. The EAT found that this link did exist since the Claimants were performing the same tasks when they worked overtime as they did when performing their usual duties.

In reaching its decision, the EAT considered what it called “the overriding principal of EU case-law”, this being that normal remuneration must be maintained so that pay in respect of annual leave corresponds to remuneration while working. To not include this voluntary, but frequent, overtime in the calculation of holiday pay would be to potentially deter a worker from taking annual leave – which is exactly what the legislation (and the case law flowing from it) is intended to prevent. It seems therefore that the reverse is the case. Not only must taking holiday not be detrimental to an employee but it may, in fact, result in a windfall since, had the employees not been on annual leave, they may have chosen not to work the overtime in any event. It remains to be seen, however, how frequently overtime has to be worked before it becomes “normally worked”.

The full case report can be found here: