Beverley Sunderland: Tribunal finds holiday pay should include regular voluntary overtime

Beverley Sunderland

In Lock v British Gas Trading the European Court of Justice (ECJ) confirmed that commission must be included in the calculation of holiday pay where commission is intrinsically linked to the job. Six months later, in May 2017, the Employment Appeal Tribunal (EAT) in Bear Scotland Ltd v Fulton confirmed that even if an employer is not obliged to provide overtime to an employee but the employee is obliged to work it, then this must be included when calculating holiday pay for the 20 days ‘European’ statutory holiday required under the Working Time Directive.

On 31 July, in Dudley Metropolitan Borough Council v Willetts the EAT confirmed that purely voluntary overtime, if it is sufficiently regular, should also be included.

Willetts had fixed contractual hours but also worked voluntary overtime, which he was paid for, together with voluntary standby and call-out time. Dudley Metropolitan Borough Council calculated holiday pay based on contractual hours only. Willetts brought a tribunal claim arguing that these additional sums should have been included in his holiday pay.

A tribunal agreed that the payments had been made with sufficient regularity, one week in five, that they were part of normal pay and should be included in the calculation of holiday pay. Dudley Metropolitan Borough Council appealed but the EAT dismissed the appeal. For a payment to count as normal it must have been paid on a regular or recurring basis over a sufficient period which, on the facts, this was.

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Employers should look at each case on its facts and decide if overtime is sufficiently regular to count as normal pay. The outstanding question in Lock v British Gas Trading is the correct reference period to be used for calculating holiday pay. Is it 12 weeks as currently provided for in the Working Time Regulations or is it averaged over 12 months? Until a decision on this point, employers are urged to act reasonably and record their reasons for using one or the other.

Beverley Sunderland is managing director at Crossland Employment Solicitors