Regular voluntary overtime should be factored into a holiday pay calculation

Regular voluntary overtime should be factored into a holiday pay calculation

Key Contact: Claire Knowles

Author: Daniel Evans

In 2019, the Court of Appeal held in the case of East of England Ambulance Trust v Flowers that voluntary overtime should be factored into the calculation of holiday pay when it is sufficiently regular and settled.

Background

The claim was brought by various members of ambulance staff who contended overtime they worked should be considered part of their normal remuneration and factored into the holiday pay they were entitled to. The claimants worked two types of overtime. Non-guaranteed overtime, which arose when a call-out took them past their contractual hours and voluntary overtime, which afforded the claimants the opportunity to volunteer to take on additional shifts. The claimants contended that both types of overtime should be included in their holiday pay calculations.

The Courts’ Decisions

In the first instance, the Employment Tribunal held that non-guaranteed overtime should be included in the holiday pay calculation, but voluntary overtime should not be included.

The Employment Appeal Tribunal (‘EAT’) overturned the decision and found that voluntary overtime was part of normal remuneration, when it has been offered over a significant period of time and on a regular and reoccurring basis. What is considered a significant period of time and regular and reoccurring would be considered on a case-by-case basis.

The Court of Appeal agreed with the EAT and confirmed that providing voluntary overtime is sufficiently regular and settled, it should be factored into holiday pay calculations.

East of England Ambulance Trust have appealed the decision and currently await a decision from the Supreme Court who will have a final say on the matter. We will report on that judgement when it becomes available.

Comment

The Court of Appeal’s decision will likely result in many more cases being brought before the Employment Tribunal, to determine when voluntary overtime is considered regular and settled.

Employers should be reviewing how regularly its workers are working voluntary overtime. If there is a distinct pattern to the overtime or if it is regularly paid, then it would be prudent to include the pay in the workers holiday pay calculation to avoid workers bringing unlawful deduction of wages claims. The employer should calculate the average pay the worker receives over a 52-week reference period (excluding any weeks when no pay was payable) to calculate the workers holiday pay entitlement.

For further guidance about holiday pay or any of the topics covered in this article, contact our Employment Team today.

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