Opinion

Voluntary overtime and holiday pay - To include or not to include?

30th October 2017

The calculation of holiday pay has long been the topic of debate. The decisions laid down in Bear Scotland, Williams and Lock confirmed the various payments that must be taken into consideration in the calculation of holiday pay. As set out in these decisions, holiday pay must be based on normal pay which is taken to include amongst other payments, commission payments, productivity/performance bonuses, travel and other allowances that are treated as taxable remuneration and shift allowances and premiums.

In 2016 the Employment Tribunal (ET) in Brettle and others v Dudley Metropolitan Borough Council, found that payments in respect of voluntary overtime should be considered as part of normal remuneration for the purposes of calculating holiday pay. Of course as this was a decision of the ET, it did not have any binding authority. However and upon appeal, the Employment Appeal Tribunal have laid down the binding decision that employees that work voluntary overtime beyond their contracted hours should have their voluntary overtime pay included within the calculation of holiday pay.

In Brettle, the claimants were a group of 56 employees who were categorised as “Quick Response Operatives”. Their roles varied and included plumbers, roofers, electricians, storemen and operations officers. The employees worked regular hours of 37 hours per week. In every four and on some occasions, five week period, the employees were able to work additional voluntary hours. The payments made in respect of these voluntary hours were however, excluded from the calculation of their holiday pay. The employees argued that the failure to include voluntary payments within the calculation of holiday pay, amounted to a breach of the Working Time Regulations 1998 (“WTR 1998”).

The ET accepted the employees claim and upon appeal by the council, the EAT subsequently upheld the claim. The council submitted that voluntary overtime should not be considered as part of the normal remuneration package however the EAT rejected this interpretation.

The EAT reasoned that the exclusion of payments for voluntary work that is normally undertaken would result in a financial disadvantage that would deter workers from taking leave. In addition, the judge also commented that when undertaking voluntary overtime, the employees were undertaking the same tasks that they would perform under their contracts of employment. Therefore and during overtime, there was no deviation from the standard work that the employees would have done during their contracted (non voluntary) hours.

Employer Considerations

The case of Brettle stands for the proposition that voluntary overtime can be included within the calculation for holiday pay. Importantly, whilst they can be included, payments in respect of voluntary overtime will not always be included in the calculation for holiday pay. If voluntary overtime is not a regular occurrence, the lack of frequency and regularity may negate the inclusion of voluntary overtime payments within the calculation of holiday pay. As commented by Justice Simler, [if the]…….“pattern of work extends for a sufficient period of time on a regular and/or recurring basis to justify the description “normal”, the principle in Williams applies”.

Employers that offer regular opportunities for voluntary overtime which in practice, is common, should be aware of the decision in Brettle. As per Brettle, if voluntary overtime and the associated payments are regular within the operation of a company, there is now the potential for these payments to be included within the calculation of holiday pay.

 

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