Employees who regularly work voluntary overtime should have these payments included when calculating their holiday pay, following a landmark decision on overtime and holiday pay at the Employment Appeal Tribunal (EAT) last week, in the case of Dudley Metropolitan Borough Council v Willetts.
This case involved 56 Unite (the union) members who were employed as various tradesmen who maintained the council’s housing stock. The EAT discerned that the work performed during overtime involved the same tasks as carried out under their individual contracts of employment. Further, that excluding overtime payments from holiday left workers at a financial disadvantage and could deter them from taking the holiday that they are entitled to; as they could potentially earn more if they continued working, without taking holiday. From this perspective, it is not difficult to see how holiday pay should correspond to ‘normal remuneration’, that includes voluntary as well as compulsory overtime.
The decision will come as a major blow for some employers whose pay systems calculate holiday pay with reference only to basic hours. It represents a clear direction of travel around the meaning of normal pay when working out holiday; i.e. that workers who take holiday should be no worse off financially than when they don’t take holiday. Because holiday is a European Working Time Directive right, which is based on the social policy of health, safety and welfare for people in work, who should take holiday rather than avoid doing so. This decision is limited to the four weeks’ minimum leave required by the Directive.
If you wish to discuss this topic further please contact a member of the employment team.