Should pay for Voluntary Overtime be included in holiday pay calculations?

Employees who regularly work voluntary overtime could be eligible for additional holiday pay, following the Employment Appeal Tribunal's decision in Dudley Metropolitan Borough Council -v- Mr G Willetts and Others.

In that case, the Claimants, a group of 56 employees, were employed by the Respondent in a number of different roles in the repair and improvement of council-owned housing stock.

They argued that the pay they received for voluntary overtime should be included in the calculation of their holiday pay, saying that excluding 'payments for "voluntary" work is inconsistent with the overriding principal of EU case-law that normal remuneration must be maintained so that pay in respect of annual leave "corresponds to" remuneration while working.'

The EAT agreed with the Claimant, stating that:

'In each case the relevant element of pay must be assessed in light of the overarching principle and objective of Article 7 [of the Working Time Directive] which is to maintain normal remuneration so that holiday pay corresponds to (and is not simply broadly comparable to) remuneration while working.

…For a payment to count as “normal” it must have been paid over a sufficient period of time.  Items which are not usually paid or are exceptional do not count for these purposes.  But items that are usually paid and regular across time may do so'.

The EAT accepted the Claimants' position that this test had been satisfied in their case, because there were clear patterns of regular voluntary overtime, and therefore ordered that their pay for voluntary overtime should have been included within the calculation of their holiday pay.

The EAT further stressed:

'The Working Time Directive draws no distinction between work that involves tasks that are contractually required and those that are done as a consequence of volunteering to be on standby or callout or working overtime under other special or separate arrangements'.

The EAT did warn however that it 'will be for the fact-finding tribunal to determine whether it is sufficiently regular and settled for payments made in respect of it to amount to normal remuneration.' Therefore, whether or not voluntary overtime should be included in the calculation of holiday pay is a matter to be assessed on a case by case basis.  

Monday's Judgment, the latest in a series of cases relating to the calculation of holiday pay, is the first legally-binding precedent on the issue of the relationship between pay for voluntary overtime and holiday pay.

We anticipate that Employment Tribunals will see an increase of unlawful deduction from wage claims with employees claiming back unpaid holiday pay, especially as claimants now do not need to pay a fee to issue an Employment Tribunal claim.  

If you are in any doubt about what this Judgment could mean for you, please get in touch with our dedicated Employment Team who will be able to advise you.

You can read the full Judgment here.


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