Employers face a flood of back pay claims following a tribunal decision that payments for voluntary overtime can form part of “normal remuneration” for the purposes of calculating holiday pay.

The decision in Dudley Metropolitan Borough Council v Mr G Willetts and Others [July 2017] will have employees who regularly work voluntary overtime checking to see if they could be eligible for extra holiday pay, thus adding to employers’ costs.

The Employment Appeal Tribunal agreed with the assertions of a group of 56 employees that the pay they received for the voluntary overtime they worked should be included in the calculation of their holiday pay, as the overtime was so sufficient and regular to amount to normal pay, which in this case was once every five weeks.

Compulsory and non-guaranteed overtime already have to be accounted for in holiday pay calculations, and this case now adds voluntary overtime to that list of factors to take into account.

The judge stated that the overarching principle was that holiday pay must agree with what a worker is normally paid whilst working, though this only relates to the 20 days’ holiday entitlement under EU law and not to the extra 8 days of entitlement under UK law, or any additional holiday entitlement.

It remains unclear as to the period of time to be taken into account in calculating holiday pay, though a period of 12 weeks prior to the holiday is the minimum.

Whilst there is an appeal pending in this case, the recent scrapping of employment tribunal fees will open the floodgates to more claims for back pay; employees can claim up to 2 years’ worth of holiday pay.

The tribunal did stress that in any subsequent claims a tribunal would have to determine whether payments for voluntary overtime were sufficiently regular and settled to amount to normal remuneration. Therefore, each case will need to be assessed on its merits.

Employers will need to review their procedures to check where voluntary overtime could be viewed as being sufficiently regular as to be normal pay.

If you would like to discuss the issues raised in this article, please contact your usual Bishop Fleming adviser.

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