The Inclusion of Voluntary Overtime Payments in Holiday Pay

14 August 2019

In August 2018, we reported the Employment Appeal Tribunal’s decision in the case of Flowers v East of England Ambulance Trust, whose determination was that voluntary overtime should be included in the calculation of holiday pay in accordance with the Working Time Directive.

The Trust appealed and the issue has now been considered by the Court of Appeal

To remind you of the facts, the employees were employed in a range of roles relating to the provision of ambulance services. There were two types of overtime shifts that they might encounter. The first type was ‘non-guaranteed overtime’, which would occur when the workers were obliged to carry on working beyond the end of their shift because, for example, they were in the middle of a task and needed to stay to complete it. The second type of overtime was ‘voluntary overtime’. There was no expectation on workers to volunteer for voluntary overtime, they were completely free to choose whether or not to work any voluntary overtime shifts. The workers received extra pay for both types of overtime.

The workers argued that under the Working Time Directive they were entitled to ‘normal remuneration’ by way of holiday pay (i.e. inclusive of both types of overtime pay) and that the terms of their contracts also entitled them to have both types of overtime included in the calculation of their holiday pay. The original employment tribunal had already established that the non-guaranteed overtime should be included in the calculation, but the issue of voluntary overtime was put to the Court of Appeal.

The Court of Appeal ruled that the employees had a right to have their voluntary overtime pay taken into account when calculating holiday pay, as long as the overtime could be viewed as a sufficiently ‘regular and settled’ pattern for it to be considered ‘normal’ remuneration. The Court of Appeal expressed concern that the exclusion of voluntary overtime from holiday pay would encourage employers to set artificially low contractual hours and to falsely refer to additional hours as overtime. It was also noted that the exclusion of voluntary overtime which was regularly undertaken would create a disincentive to taking holiday.

This case therefore demonstrates that employers must be careful when calculating holiday pay for employees who regularly work overtime. No distinction should be made between overtime that is compulsory and overtime that is voluntary. In practical terms, this means employers will need to consider on a case by case basis whether an employee’s overtime working pattern can be considered ‘regular and settled’, and holiday pay must be calculated accordingly.

By Olivia Stanton

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