Do your employees regularly work overtime? Do you include it when calculating holiday pay? Should you?

Employment & HR Article

08 August, 2017

The Employment Appeal Tribunal (EAT) has handed down its decision in the case of Dudley Metropolitan Borough Council v Mr G Willetts and Others (UKEAT/ 0334// 16/JOJ).

The EAT has held that voluntary overtime does fall within the scope of Article 7 of the Working Time Directive and so, within the concept of 'normal remuneration' for the purposes of calculating holiday pay.

Facts

A group of 56 employees employed by the Council brought holiday pay claims in respect of the statutory holiday pay they had received. The employees contended that they received the incorrect rate of statutory holiday pay and that the Council had failed to reflect voluntary overtime, out-of-hours standby pay and call-out payments in their statutory holiday pay calculations.

The claimants were contracted to work for 37 hours a week, which counted as their 'normal hours' but in addition they also performed additional duties on a voluntary basis.

Decision

The claimants were successful in their arguments and the Employment Tribunal found that pay received for voluntary overtime should be included in holiday pay calculations as it was paid with sufficient regularity and failure to pay would render the employees at a financial disadvantage when taking leave. The respondent appealed the decision.

The EAT dismissed the appeal and again found in favour of the employees. They confirmed the Employment Tribunal's decision that voluntary overtime, on-call allowances and out of hours payments are all capable of counting towards holiday pay.

The EAT upheld that the payments made were directly linked to tasks required under their contracts of employment even if by a separate agreement or arrangement. The EAT stated that any reduction in salary would deter workers from their rights to take paid annual leave and to exclude such payments would conflict with the principle of the Working Time Directive and its purpose to put workers in a position of remuneration, comparable to the position they would be in during periods of work.

What does this mean for employers?

This is an extremely important decision as it clarifies the previously unclear position on voluntary overtime for the purposes of calculating holiday pay and as an EAT decision it is binding on Employment Tribunals.

Employers must look carefully at how regularly voluntary overtime is being undertaken and to ensure that, where it is regular or recurring such time is taken in account when calculating holiday pay.

It is however important to note the emphasis placed by the EAT on the need for payments to be made with sufficient regularity and that purely ad hoc, irregular and exceptional overtime may still be excluded unless it is paid for a sufficient period of time on a regular and/or recurring basis.

With the back drop of the recent Supreme Court ruling in R (Unison) v Lord Chancellor (2017) in which the Supreme Court unanimously agreed that tribunal fees are unlawful we are likely to see an increase in holiday pay claims. There remains no set criteria as what amounts to 'normal pay' and this recent case highlights the need to assess your holiday pay calculations to ensure compliance rather than adopt a 'wait and see' approach.

If you are interested in the Forbes Employment team auditing your holiday pay process, please contact Sarah Petrie.

Back

06 Dec 2017

Employment & HR

NEWS AND ARTICLES

Forbes Joins Association of Member-Directed Pension Schemes

Leading law firm Forbes Solicitors has enhanced its work in the pensions sector

Read the article

We find that the Forbes team take a pragmatic and supportive approach and enjoy working with their team.

Jayne Mizon
HR Manager
Kepak Convenience Foods

More clients

We approached Forbes Solicitors on a recommendation because as a small independent organisation we needed clear guidance and backing on HR matters.

Stephen Neaves
Manager
Piccadilly Garden & Support Service

More clients

The Forbes team were fantastic, the work and effort they put in was impressive and I was made to feel at ease throughout the proceedings. I can not thank the Forbes team enough

Peter Morley

More clients

Without doubt Jonathan Holden is like a security blanket. He understands that schools need to act in the best interest of school as a whole

Brenda P Allen
FCIPD

More clients

Jennifer was great and worked beyond the call of duty. No faults.

James Darby

More clients

I will keep promoting you and your services because I'm fully committed to the quality of your work and the impact that it has in school.

Sharon Asquith
Principal
Ashton Community Science College

More clients

Amy Stokes was more than helpful throughout the whole process - Thank you Amy.

Stephen Fielden

More clients

Forbes are proactive in relation to changes in legislation and keep me informed via regular seminars, updates and bulletins.

Nicola Watson
Business Support Manager
Birchall Catering Supplies Ltd

More clients

I have always found everyone at Forbes to be approachable, helpful and professional, and would have no hesitation in recommending them to any other business

Catherine Ogden
Commercial Director
E A Foulds Limited

More clients

May I say how much the employment team at Forbes have helped Samlesbury Hall with staff issues over the past ten years.

Sharon Jones
Hall Director
Samlesbury Hall

More clients

...we have found Forbes to be an excellent team of people to work with, fully understanding our needs and goals.

Landon Helsby
Managing Director
Apeks Marine Equipment Ltd.

More clients

Make an enquiry