Voluntary Overtime-Inclusion in Holiday Pay
A recent case has dealt with this issue.
In the Case, which involved council employees, they were formally contracted to work 37 hours a week with many also having contractual right to work 2-4 hours of overtime.
The employees argued the pay they received for performing additional duties on a voluntary basis(as well as travel time linked to this work)should be taken into account for holiday pay calculations.Additional duties were out of hour standby shifts,attending callouts and voluntary overtime.
The Employment Appeal Tribunal ruled in favour of the employees.
The Tribunal found that if voluntary shifts and other additional duties performed on a voluntary basis formed part of normal pay then this should be included in holiday pay calculations.
Implications of the Decision
1.What is a normal payment and when will it qualify?
It does not need to be a fixed period or the same amount on a weekly/monthly basis.The main point is that it has to be with a degree of Regularity to amount to normal remuneration.
Has overtime pay become sufficiently regular and settled so as to require inclusion in holiday pay.
Working a few extra hours here and there over the course of several months with no pattern and breaks in occurrence is not likely to satisfy the ‘’sufficiently regular’’ requirement.
However if someone works an extra 2 hours every Friday and Saturday on a long standing basis(whether continous throughout the year or every other month or through peak trading times)there will be a strong argument to take account of the overtime hours.
2.What reference period should be used?
No firm standard has been set.Suggested periods have ranged from 12 weeks to 12 months.The appropriate period will depend on the circumstances of each case-aperiod which reflects the normal working pattern of the employee.
3.What to do?
Now there is a binding decision on voluntary overtime an audit should take place to consider whether there is any potential liability.
The decision only applies to the first 4 weeks of holiday pay(the portion which is required under EU Law).