The question of what payments should be included in calculating a week’s pay for holiday purposes has been taxing employers for some time now. We reported on the important case of Bear Scotland v Fulton (and others) at the end of 2014. This case decided that compulsory overtime should be included when calculating a week’s pay for a person whilst they are on holiday. This left the open the question of whether voluntary overtime should be included, and the general view is that it should be provided that it is worked regularly.
In the very recent case of Patterson v Castlereagh Borough Council (2015) heard by the Northern Ireland Court of Appeal on 17 June 2015, the court decided that non-compulsory but regular overtime should be included in the calculation of holiday pay. However, disappointingly, the court failed to give any guidance on what is meant by “regular” overtime. This leaves employers in the same position as they were before this case with no clear direction from the courts.
However, the basic principle behind these cases is simple: an employee should be paid a normal week’s pay when they are on holiday. Our view is that if an employee works overtime fairly consistently over a period, then they are likely to be entitled to be paid in respect of that during any holiday. This still begs the question as to what is meant by “regular”, what time frame should the overtime be calculated over, what happens in seasonal industries etc? These questions remain to be determined on a case by case basis.
It is worth noting that decisions from the Northern Ireland Court of Appeal are not binding on the English courts and tribunals. However, they are persuasive, and to that extent this case does give some support to the view that voluntary regular overtime should be included.
It is also timely to remind you that any claims in respect of holiday pay filed from 1 July 2015 will be limited by legislation to a maximum period of 2 years arrears, which is of course reassuring for employers where exposure could otherwise have potentially gone back to the introduction of the Working Time Regulations in 1998.
This is a complicated and rapidly changing area of law. Employers should seek specialist advice before making decisions in this area.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).