Regular Voluntary Overtime Included in Holiday Pay

Towards the end of last year, we discussed in an article how holiday pay must now include results based commission.

The ruling in the Court of Appeal followed a case involving a British gas sales person who had claimed his holiday pay had been incorrectly calculated as it did not include any allowance for the commission he would have earned during the period he was on holiday. We discussed at the time how the decision made by the Court was set to have serious consequences for any business with employees on commission schemes.

Further to this and no doubt of even further concern to business owners, the Employment Appeal Tribunal (EAT) has recently confirmed that payments for overtime undertaken on a purely voluntary basis should be included in holiday pay, providing they are paid regularly enough to constitute ‘normal pay’.

The Case of Dudley Metropolitan Borough Council v Willetts

The ruling came about following the conclusion of the case of Dudley Metropolitan Borough Council v Willetts and others in which 56 council workers brought employment tribunal claims for unlawful deductions from wages in connection with how their holiday pay was calculated.

The council workers claimed that their holiday pay should have included payments for voluntary overtime. The Tribunal concluded that the workers’ voluntary overtime payments were sufficiently regular to constitute ‘normal pay’, which, according to vast volumes of past case law, must be included in holiday pay.

All Cases Must be Judged on an Individual Basis

The EAT said that where a pattern of work extends for a sufficient period of time and recurs regularly, it should be classed as ‘normal’. However, the EAT did issue a warning that cases do vary and that it is down to the individual Employment Tribunal to decide whether or not overtime payments are adequately ‘regular and settled’ so as to be included in the holiday pay.

This recent decision provides further clarification on a one of the most discussed subjects in employment law.

If you are unsure as to whether your methods of calculating holiday pay fall in line with the latest rulings and case law, seek advice from your local bookkeepers.

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