Voluntary overtime and holiday pay – the latest

The Court of Appeal has given its judgement in latest case regarding how voluntary overtime needs to be taken into account in holiday pay. The judgment is not a surprise, as it confirms the previous position taken by the Employment Appeal Tribunal, but as the issue of voluntary overtime and holiday pay is one that a number of our clients are still dealing with, we thought it would be helpful to sum up how we got to this point, and take a look at the current legal position.

Back in 2014, the groundbreaking case of Bear Scotland v Fulton (and others) established that non-guaranteed overtime (where the employee is required to work overtime if it is offered, but the employer is not obliged to offer overtime) and compulsory overtime (where the employee is entitled to be paid for the overtime even if they don’t work it) should be included in holiday pay calculations. However, the position regarding overtime that was completely voluntary was still unclear.

Subsequently, in the case of Dudley Metropolitan Borough Council v Willetts and others  in 2017, the Employment Appeal Tribunal held that voluntary overtime payments should be reflected in an employee’s holiday pay, as long as the voluntary overtime is undertaken with “sufficient regularity”.

The Court of Appeal has now confirmed, in the recent case of East of England Ambulance Service NHS Trust v Flowers that the Dudley case was correctly decided.

There is, however, still quite a lot of uncertainty as to what will amount to “sufficient regularity”, and this will have to be determined on a case by case basis by the Employment Tribunals.

As we have previously advised, if you have staff who work overtime then the best way to address these types of issues, and to hopefully avoid challenges, is to review your holiday pay calculations to ensure that holiday pay is calculated based on an employee’s actual earnings over a reasonable period of time. As to what is a reasonable period of time, the position may well depend on the individual circumstances of each case, so it is best to take advice. We have helped a number of our clients through this process.

Do you need help with holiday pay issues? Please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.