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Voluntary Overtime and Holiday Pay

The Employment Appeal Tribunal has found that pay for voluntary overtime, normally worked, is ‘normal’ remuneration’ for the purposes of calculating holiday pay.

The Case

The Respondents, in the case of Dudley Metropolitan Borough Council (“the Council”) v Willetts, were Quick Response Operatives working for the Council. They were electricians, plumbers, roofers who, as well as working day jobs, also worked entirely voluntary overtime which paid additional standby and call out allowances.

The Council argued that overtime payments were not ‘normal remuneration’ because they lacked an intrinsic link to the performance of tasks required under the employment contract.

The Employment Appeals Tribunal rejected this narrow interpretation. They found that to exclude such payments from holiday pay resulted in a financial disadvantage to workers which would deter or might deter them taking annual leave. The Employment Appeal Tribunal also found a clear link between the payments and the performance of their duties because when they were working the overtime the operatives were performing the same tasks as under their contracts.

So what does this mean?

Holiday pay must correspond to normal remuneration. Simply put, ‘normal pay’ is that which is normally received. Normal means paid over a sufficient period of time i.e. what would the worker have earned if they had not taken leave.

Therefore as an employer, you should look back over the last 13 weeks’ pay prior to their holiday and take the average earnings over that period to work out employees pay for that holiday period.

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