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Case law: Court of Appeal confirms when voluntary overtime should be included when calculating holiday pay

Employers should ensure voluntary overtime is taken into account when calculating holiday pay if that overtime is, over a sufficient period, broadly regular and/or recurring and predictable enough to qualify as normal remuneration, following a Court of Appeal ruling.

July 2019

This update was published in Legal Alert - July 2019

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

Under their contracts of employment, employees working as ambulance crew were required to work 'non-guaranteed' overtime. They could also work 'voluntary' overtime if they chose to, ie, overtime the employer was not obliged to offer and the employee was not obliged to work. Both types of overtime were irregular, and different crew members worked different levels of each type.

The employees claimed that voluntary overtime should be taken into account when calculating their holiday pay. They said it was part of their ‘normal remuneration’ because it was paid over a ‘sufficient period of time’. Their employer disagreed.

The Employment Appeal Tribunal (EAT) found in favour of the employees. The law says that the underlying reason for the holiday pay rules is to ensure that holiday pay should correspond to normal remuneration received while not on holiday, so there is no financial disadvantage to taking a holiday. So where patterns of work – even voluntary – prevail over a sufficient period of time, and on a ‘regular and/or recurring basis’, they can become ‘normal’. Overtime pay normally received for work within such patterns should therefore be included when calculating holiday pay.

The Court of Appeal upheld the EAT’s ruling, confirming that voluntary overtime should be taken into account when calculating statutory holiday pay if it is sufficiently regular and settled to amount to ‘normal’ remuneration. It rejected the employer’s argument that voluntary overtime was, by definition, of an ‘exceptional and unforeseeable nature’ and so could never amount to normal remuneration.

Operative date

  • Now

Recommendation

  • Employers should ensure an employee’s voluntary overtime is taken into account when calculating holiday pay if it is, over a sufficient period, broadly regular and/or recurring and predictable enough to qualify as normal remuneration.

Case ref: East of England Ambulance Service NHS Trust v Flowers & Ors [2019] EWCA Civ 947

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