HOLIDAY PAY UPDATE

HOLIDAY PAY UPDATE

Pay for voluntary overtime worked on a regular basis can amount to “normal remuneration” for the purposes of calculating holiday pay, holds the EAT in Dudley Metropolitan Borough Council -v- Willetts.

The employees worked for the Council as electricians. plumbers, roofers, etc. who worked contracted hours in their day jobs but also worked overtime on an entirely voluntary basis, which resulted in additional payments.

The Council argued that the overtime payments lacked the necessary link to the performance of tasks required under the employment contract and, therefore, were not “normal remuneration”.  This was rejected by the EAT, which found there was a clear link between the payments and the performance of their duties, because during the overtime hours worked the employees were undertaking essentially similar tasks as they did when working their contracted hours.  The EAT also indicated that to exclude such payments from holiday pay would result in a financial disadvantage to workers which would or may deter the taking of annual leave, which is contrary to EU legislation.

Whether or not pay received in respect of voluntary overtime amounts to normal pay will depend upon the regularity of that overtime and overtime pay, which is likely to fall to be determined on a case-by-case basis.

This decision of the Employment Appeals Tribunal represents binding law and members are advised that they may need to take steps to review existing holiday pay arrangements.  Please contact the legal team for further advice.