Is it now time to include voluntary overtime when calculating holiday pay? The Northern Ireland Court of Appeal recently held in Patterson v Castlereagh Borough Council that voluntary overtime should, in principle, be included for the purposes of calculating holiday pay in Northern Ireland.
Since the Bear Scotland case, only compulsory overtime had been included for the purposes of calculating holiday pay, however, the ‘Patterson case’ opens the door for voluntary overtime to be included also.
Employers in England and Wales should be aware of the potential implications of this decision, as although decisions of the Court of Appeal in Northern Ireland are not binding on the Courts in England and Wales, employment tribunals in England and Wales are likely to see this decision as persuasive authority.
From 1 July 2015, employees may only make a claim of unlawful deductions from wages in respect of deductions in the previous 2 years (i.e. a backstop has been put in place preventing backdated claims for many years of underpayments). This applies in respect of underpayments of holiday pay.
The reduction in the period of time that employees can bring claims for unlawful deduction from wages is some comfort to employers, in respect of backdated holiday pay claims but as the case law continues to develop employers should consider the options available to them to deal with the calculation of holiday pay going forwards which are:
- Include all overtime (guaranteed and voluntary) in the calculation of holiday pay
- Only include guaranteed overtime in the calculation and see how the case law develops in respect of voluntary overtime
- Refuse to include any overtime in the calculation of holiday pay in the hope of a successful appeal against the Bear Scotland decision
Our advice would be to proactively deal with the developing case law and at the very minimum include guaranteed overtime to guard against tribunal claims.
Tom Evans is an Associate in DTM Legal’s employment and HR team. If you have any queries regarding employment or HR issues please contact Tom on 0151 230 1217 or by email: tom.evans@dtmlegal.com
