Holiday pay: regular voluntary overtime included, says EAT

Payments for purely voluntary overtime should be included in holiday pay if they are regular enough to constitute “normal pay”, the Employment Appeal Tribunal (EAT) has confirmed.

In Dudley Metropolitan Borough Council v Willetts and others, 56 council workers who repair and improve housing brought employment tribunal claims for unlawful deductions from wages in relation to the calculation of their holiday pay.

The claimants argued that their holiday pay should have included, among other things, payments for purely voluntary overtime.

The employment tribunal accepted that staff could “drop on and off the rotas to suit themselves whether day by day, week by week, month by month or permanently” and additional work was “almost entirely at the whim of the employee, with no right to enforce work on the part of the employer”.

The tribunal, recapping on the large volume of case law on the calculation of holiday pay, stressed that “normal pay” must be included in holiday pay.

The tribunal concluded that the council workers’ voluntary overtime payments are sufficiently regular to constitute “normal pay”.

In the first binding decision on this point in the courts and tribunals in England and Wales, the EAT endorsed the employment tribunal decision.

The EAT held that, where the pattern of work extends for a sufficient period of time on a recurring basis to justify the description “normal”, voluntary overtime pay must be included in holiday pay.

However, the EAT cautioned that each case must be decided on its own facts, and it is up to individual employment tribunals to determine whether or not the overtime payments are sufficiently “regular and settled” to require inclusion in holiday pay.

Stephen Simpson, principal employment law editor at XpertHR, commented: “The decision provides further clarification for employers that, while compulsory overtime must be included in holiday pay, regular voluntary overtime should also be included.

“Surprisingly, this is the first binding appellate decision in England and Wales on this point. Previous case law has strongly hinted that regular voluntary overtime should be included in holiday pay, but it is important that employers now have this clear guidance from the appellate courts.”

Further analysis of the judgment in Dudley Metropolitan Borough Council v Willetts and others and its implications for employers is available on XpertHR.