Following a significant number of cases, which have gone to the European Court of Justice (ECJ) and back, it is settled law that when calculating holiday pay, elements such as commission, guaranteed overtime and non-guaranteed overtime must be included. However, what about voluntary overtime? This can still form a large part of employees' pay, so should it be considered when they are on holiday?
The case of Dudley MBC v Willets held that voluntary overtime was part of normal remuneration if it was paid over a sufficient period of time on a regular or recurring basis. This was followed by East of England Ambulance Trust v Flowers, which said exactly the same.
However, in December 2018, the ECJ decided a case called Hein v Albert Holzkamm GmbH. Here, it said: "Given its exceptional and unforeseeable nature, remuneration received for overtime does not, in principle, form part of the normal remuneration that the worker may claim in respect of the paid annual leave." The East of England Ambulance Trust went to the Court of Appeal quoting this.
The Court of Appeal concluded that what the Hein case meant was that there was a difference between "exceptional and unforeseeable overtime payments on the one hand and broadly regular and predictable ones on the other."
Employers need to be keeping a record of overtime worked to decide whether or not to include it in holiday pay calculations. There is a difference between a one-off payment, for example if there has been a flood of work and all staff have had to work overtime for one week in the year that will never be repeated, which would not be included in holiday pay, and employees regularly doing overtime every month, although perhaps not regularly doing the same hours, which would need to be included in holiday pay.
Beverley Sunderland is managing director at Crossland Employment Solicitors
