As widely reported, a recent slew of cases has changed the law in the UK so that workers who work regular hours, but receive additional pay (in the form of overtime, commissions, bonus etc) are now entitled to have that additional pay included in the calculation of holiday pay in many circumstances. This is because EU law states that workers should receive their “normal remuneration” during periods of statutory holiday for work which is “intrinsically linked” to the performance of their duties.
There remained question marks, however, in relation to certain types of payment. For example, if overtime is voluntary (overtime which the employee was not contractually required to perform) is payment received for such work part of the worker’s “normal remuneration”?
In the case of Dudley Metropolitan Borough Council v Willet and others, the workers argued that various allowances and payments made for voluntarily working in excess of their contracted hours should be included in the calculation of holiday pay - it was worked regularly and was therefore part of their “normal pay”. The employer sought to argue that, with the work being voluntary, it was not “intrinsically linked” to the performance of the tasks that were required to be performed under the contact of employment.
The Employment Appeals Tribunal rejected the employer’s argument. It cited that the purpose of the Working Time Directive (WTD) was to encourage workers to take their holiday. Receiving less than their normal pay at times of holiday was likely to discourage workers from taking it. Whether a payment is part of “normal pay” does however depend on the facts of each case. A payment would be “normally made” if paid on a regular basis, say for one week in four or five weeks (although we do not think this comment should be treated as a “hard and fast” rule).
Employers will therefore need to apply this case in calculating holiday pay for their workers who regularly work voluntary overtime. In most cases whether this applies should be a matter of common sense. It should also be noted that the rule only applies to the four weeks’ holiday provided under the WTD. It does not apply to the additional 1.6 weeks’ holiday which the UK law requires.