For the first time in England, a tribunal has accepted the argument that employees are eligible for holiday pay to include voluntary overtime if employees regularly work voluntary overtime beyond their contracted hours. DTM Legal is here to explain how this perspective could impact you as an employer.
This dramatic, albeit not wholly unexpected, development extends the right of employees to have their holiday pay calculated to not only include ‘guaranteed’ overtime (i.e. fixed amount of compulsory overtime) and ‘non-guaranteed’ overtime (i.e. no fixed amount of overtime but the employee has to do it if asked) but now also voluntary overtime.
The presiding judge ruled in White & Others v Dudley Metropolitan Borough Council [2016] 1300537/2015 that providing voluntary overtime work is undertaken with “sufficient regularity” then voluntary overtime, voluntary call-out payments and voluntary standby should be considered “normal pay” and therefore reflected in a worker’s holiday pay calculation.
In White & Others, tradesmen working on council housing stock, elected to work on a Saturday on a voluntary basis and go on standby every four weeks to handle emergency call-outs. The tradesmen received another £725 for the week they were on standby and effectively relied on the overtime payments to make up their pay.
The judge found that voluntary on-call rota had been in place with such regularity and for such a period that it had become part of their normal work and consequently the overtime payments had become part of their normal pay. In spite of the council’s arguments that the payments did not form part of their ‘contractual pay’ the judge ruled under the Working Time Regulations that the work had to be included for the first 20 days of annual leave when calculating holiday pay.
This ruling is a further development from the Northern Irish case of Patterson v Castlereagh Borough Council [2015] IRLR 721 which previously held payments of a voluntary nature were not necessarily excluded from holiday pay calculations as the judge in the White & Others accepted if claimants had done overtime on a Saturday for a number of years, and delivered call-out duties for a number of years, the payments would become part of the employees normal expected pay.
The ruling may pave the way for claims from claimants who regularly work and get paid for a couple of extra hours a week although it is not clear what constitutes ‘regular work’. Is it voluntary overtime work undertaken on a weekly, monthly, quarterly, annual basis? Only the development in the case law will bring clarity on this point.
Employers who operationally rely on overtime (whether guaranteed, non-guaranteed or voluntary) should review their method of calculating holiday pay in light of this development in the law, as failure to include overtime (and commission) payments could lead to a large and growing liability.
If you would like to find out more about calculating holiday pay for your employees, please contact Tom Evans on 0151 230 1217 or tom.evans@dtmlegal.com for more information.
