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Voluntary overtime remuneration may need to be taken into account when calculating workers’ holiday pay

by Philomena Price | Sep 25, 2017 |
Alarm clock in office

In the UK, the Law entitles full-time workers to 5.6 weeks’ holiday pay per year; this consists of 4 weeks as a result of ‘European Law’ and 1.6 weeks as a result of the UK's decision to increase this. For the portion of holiday under European Law (4 weeks), holiday pay must correspond exactly to workers’ ‘normal remuneration’.

In recent years, case law has decided that ‘normal remuneration’ is pay that is normally received including: commission payments; guaranteed overtime; and non-guaranteed overtime where an employer does not have to provide overtime, but if it does, the worker is required to work.

What about voluntary overtime?

Voluntary overtime is where overtime is offered to a worker but the employer is not obliged to offer it and the worker is not obliged to work it. It has been unclear as to whether voluntary overtime is ‘normal remuneration’ and thus entitles a worker to have it taken into consideration when calculating holiday pay.

What did the recent case of Dudley Metropolitan Borough Council -v- Mr G Willets and Others decide on this?

This case concerned an employer’s appeal against a decision that payments received in respect of voluntary overtime should be treated as forming part of a worker's "normal remuneration" for the purpose of calculating holiday pay. In this case, 56 employees worked for the local authority for set contractual hours, but also worked voluntary overtime. The case concerned the calculation of "a week's pay" and whether payments made in respect of voluntary overtime should form part of a worker's "normal remuneration" for the purpose of calculating holiday pay. 

The Employment Appeal Tribunal upheld that remuneration linked to overtime work that was performed on a voluntary basis could be included in ‘normal remuneration’ for calculating holiday pay.

Whilst the Judgment did not give specific guidance on what voluntary overtime would constitute as  ‘normal remuneration’, it did state that voluntary overtime would have to be “regular” and “recurring” to justify the description “normal”. Each case is likely to turn on its own facts however where the employee works ‘regular’ overtime which is expected of him under his job description, it is likely this will fall within normal pay. It is therefore likely to be normal pay where an employee works ‘regular’ Saturdays and considers the overtime to be an extension to his working week for which he is normally paid. On the other hand, where overtime is rare, this cannot be said to be “regular” or “recurring” and therefore it is unlikely such overtime will be classed as normal pay.

It remains to be seen how “recurring” and “regular” will be interpreted by tribunals in the future but an employee or worker who works the occasional overtime is unlikely to come under this definition.

Whilst it remains to be seen if Dudley Metropolitan Borough Council has appetite to appeal, it is safe to say that this area of Employment Law is likely to be a focus of attention for both Employment lawyers and employers for some time...

*Disclaimer: While everything has been done to ensure the accuracy of the contents of this article, it is a general guide only. It is not comprehensive and does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.

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