The Employment Appeal Tribunal (EAT) in Dudley Metropolitan Borough Council v Willetts and others has decided that voluntary overtime should be included in the first four weeks holiday pay where such payments are regular enough to amount to "normal" pay. Previous holiday pay cases told us that compulsory and non-guaranteed overtime (overtime the employer is not obliged to provide but if it does, the employee is obliged to perform it) should be included in holiday pay. However, the issue of whether purely voluntary overtime should be included remained outstanding until this decision.

This question has now been answered by this case. It is an unsurprising decision and is consistent with the direction of travel on holiday pay. As with the other decisions, this only relates to the first four weeks holiday required under the Working Time Regulations (WTRs).

The case was brought against the Council by 56 employees responsible for the repair and maintenance of council houses. They had set contractual hours of 37 hours per week which represented their normal working hours. In addition, once every four weeks, and in some cases five weeks, they were on an on call register and worked additional hours. Payments for these voluntary hours were excluded from their holiday pay. The workers argued this was contrary to the WTRs. They were initially successful at the employment tribunal and the Council appealed.

The EAT referred to previous European decisions which emphasised that workers should receive their "normal remuneration" when they take holiday, that they should not be deterred from exercising their rights to take paid annual leave and that any reduction in salary would act as such a deterrent.

The EAT rejected arguments that:

  • A distinction must be drawn between regular overtime performed every week or most weeks which does form part of a normal week, and overtime that is performed albeit regularly, in only a minority of weeks;

  • Regular overtime or a normal week is linked to what the employment contract requires the worker to do. If there is such a requirement then the payment must be included. The absence of a link between the payment and the performance of tasks required under the contract does not automatically exclude such a payment from counting.

The EAT found that so long as a payment is made over a sufficient period of time on a regular basis, say for one week each month or one week in every five weeks, that is enough for it to form part of normal remuneration.

What does this mean for employers? 

Not all voluntary overtime will need to be included. The EAT said what is "regular enough" is a question of fact in each case. So, if a person works overtime irregularly, for example, where there is no predictable pattern to it or there are big gaps between the overtime working, then employers can still argue that it is not a regular payment which should be included in holiday pay.

This case will impact on the current holiday year and going forward, however, it is unlikely to lead to many backdated claims for voluntary overtime. This is because this decision did not address time limits so the current position set out in the Bear Scotland case still stands - employees who have a break of more than three months between payments will not be able to argue that they have suffered a series of unlawful deductions.

This decision is unlikely to have major implications for most NHS bodies given the absence of voluntary overtime arrangements under Agenda for Change and the various doctors contracts.

We understand that no decision has been taken yet about whether this decision will be appealed, so we will monitor the situation and keep you informed.

Dudley Metropolitan Borough Council v Willetts and others