Newsflash: Holiday pay and voluntary overtime

What do we already know?

We updated you in our September 2016 Newsletter Case update (2): Holiday pay – What about voluntary overtime? that the Tribunal in Brettle v Dudley Metropolitan Borough Council decided that voluntary overtime payments should be included in calculating holiday pay, provided that overtime is worked with “sufficient regularity” to constitute “normal pay”.

Helpfully this decision clarified that the voluntary overtime payments only need to be included in calculating holiday pay for the first four weeks of an employee’s holiday which is provided by EU law, rather than the whole UK 5.6 weeks.

What’s new?

The Employment Appeal Tribunal has upheld the Tribunal’s above decision that payments for voluntary overtime that is normally worked must be included when calculating holiday pay for the first four weeks of holiday provided by EU law and the Working Time Regulations (Dudley Metropolitan Borough Council v Willetts and Others, available here).

The EAT explained that as holiday pay must correspond with “normal remuneration”, any voluntary overtime payments that are paid over a sufficient period of time on a regular basis fall within this definition.

Comment:

Although it is helpful to have EAT authority on this point, unfortunately the EAT offered little by way of further guidance on what level of regularity or frequency is required in order for a payment to qualify as “normal remuneration”. Therefore this is a question which employers and future Tribunals are left to grapple with and, therefore, a good deal of uncertainty remains. Hopefully the employer will appeal to the Court of Appeal and, if so, we’ll be sure to let you know.

In the meantime, we’ll unpick the detail of this case to give you further guidance in our August 2017 Newsletter so watch this space…