UK: Statutory holiday pay must take account of voluntary overtime

The EAT has upheld first instance tribunal decisions that the calculation of statutory holiday pay (for the 4 weeks’ EU-derived holiday) should reflect voluntary overtime, voluntary standby and voluntary call out payments, provided that the work has been undertaken with sufficient regularity to have become part of the employee’s normal pay. The Working Time Regulations must be construed purposively to this effect.

Previous case law established that commission and certain supplementary payments had to be included in the calculation of “normal remuneration” because they were amounts for work which was “linked intrinsically to the performance of tasks which the worker is required to carry out under his contract of employment”.

The EAT in Dudley Metropolitan Borough Council v Willetts has now ruled that this did not mean that a payment would only be included if there was such an “intrinsic link”; it was just one way of establishing that the payment was “normal remuneration”. Pay for voluntary overtime may also be ‘”normal” if it extends for a sufficient period of time on a regular and/or recurring basis. Voluntary overtime carried out one in every four or five weeks was sufficiently regular to be included as “normal remuneration”. There is no requirement that the overtime be performed in a majority of weeks to be “normal”.

Even if an “intrinsic link” is required, the EAT ruled that the test was satisfied: once an employee agreed to do the overtime, he was performing tasks required under his contract of employment and that contract was in effect an umbrella contract, sitting above the specific agreement to work the overtime.

This ruling will be binding on tribunals; it is not yet known whether the employer will appeal the decision further.

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Filed under Jurisdiction: UK, Remuneration (including bonus and incentive plans), Working hours (including holiday, sick leave, overtime, rest breaks)

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