The Employment Appeal Tribunal (EAT) has upheld a tribunal’s decision that regular payments for voluntary overtime had to be taken into account when calculating holiday pay.
In Dudley Metropolitan Borough Council v Willetts the employees worked as ‘quick response operatives’ as plumbers, electricians, roofers and similar. In addition to working day jobs, they also worked voluntary overtime which paid additional standby and callout allowances – elements which they argued should all be included in their holiday pay calculations.
The Council asserted that overtime payments were not ‘normal remuneration’ because they lacked an intrinsic link to the performance of tasks required under the employment contract. However, the EAT rejected this argument because excluding these payments from holiday pay would result in a financial disadvantage, which might deter workers from taking annual leave.
“Although the rotas in question were voluntary, once an employee’s name was on the relevant rota, they were required to attend the workplace (or in the case of standby, be available),” explained Caroline Acton, Solicitor at ESP Law. “As such, the payments were intrinsically linked to the work required to be done under the contract by the worker. With regard to additional voluntary overtime, where overtime was regularly worked, this was included in normal pay.”
Acton added that the EAT had emphasised that workers should receive ‘normal remuneration’ when they take a holiday and that for a payment to count as ‘normal’, it must have been paid over a sufficient period of time.
“In light of this ruling, employers will need to consider their voluntary overtime arrangements. Is voluntary overtime regularly worked? If so, those payments will need to be included in the holiday pay calculations,” said Acton.
