The Employment Appeal Tribunal (EAT) has ruled that employers should include payments and allowances received for regular voluntary overtime when calculating holiday pay.
For voluntary overtime to be included in holiday pay, it must be sufficiently regular to be seen as part of the employee’s “normal pay”.
The EAT held that tribunals would have to reach a decision on the facts of each case, to determine whether the overtime is sufficiently regular to meet this test.
The issue of including voluntary overtime in holiday pay has cropped up in several cases, but the EAT’s judgement marks the first binding decision on the subject.
Backdated holiday pay
Employees who believe they’ve not been paid their correct holiday pay can bring a claim for unlawful deductions. If there’s a break of more than three months between underpayments, they can’t claim beyond this.
If there isn’t a break of more than three-months, claims can be made for underpayments which have occurred in the last two years.
The EAT’s judgement was given in the case of Dudley Metropolitan Borough Council -v- Willetts. This case was brought by 56 employees who worked in Dudley Council’s housing repairs team.
Overtime was not included in their holiday pay as it was entirely voluntary, and individuals were free to change their mind about working the overtime on a day-to-day basis. The employees brought a successful claim for unlawful deductions from wages, and the tribunal’s decision was upheld by the EAT.
The ruling doesn’t impact holiday pay for employees who only work occasional voluntary overtime. The decision as to whether a voluntary overtime working pattern is regular or occasional will be one for tribunals to determine, once they’ve examined the facts of each case.
In the UK, all employees have a statutory entitlement to 5.6 weeks holiday leave a year – including any bank holidays taken. Under European law, employees are entitled to a minimum of four weeks holiday leave.
Although this ruling only affects the four weeks’ holiday entitlement under European law, employers are faced with having to potentially apply this ruling to all holiday entitlement, or implement a system where holidays are paid at different rates.
How we can help
If you’re a Citation client and have any questions about the EAT’s decision, remember, our Employment Law experts are available 24/7 with our advice line.
If you’re not a client and have any queries or concerns on the EAT’s decision and how it impacts your business, we’ve a team of highly qualified experts who have extensive experience when it comes to calculating holiday pay and employee entitlements.
And with our advice guarantee, providing you follow our advice, we’ll defend you against any tribunal claims – holiday pay related or otherwise – that come your way.
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