Should holiday pay include voluntary overtime, standby and callout payments?
In some cases, definitely. In others, maybe.
Workers with no normal working hours – voluntary overtime must be included
If a worker has no ‘normal working hours’, you should calculate their statutory holiday pay as an average of all the sums earned in the previous 12 working weeks. This will include, for example, commission and overtime, even if the overtime is voluntary. This calculation applies in respect of the full 5.6 weeks’ holiday provided by the Working Time Regulations.
Workers with normal working hours – some voluntary overtime may need to be included
In our last blog on holiday pay, we discussed how to manage different types of overtime payments for workers with ‘normal working hours’.
As regards voluntary overtime (i.e. overtime that you cannot insist an employee works and you don’t need to provide) we highlighted the Northern Irish case of Patterson v Castlereagh Borough Council. This held that there is no reason why voluntary overtime should not be included in statutory holiday pay, but whether it is actually included will depend on the particular facts of each case. The court suggested that voluntary overtime will only be included if it is ‘normally’ carried out by the worker and is an ‘appropriately permanent’ feature of the worker’s remuneration.
Another decision includes voluntary overtime
An English employment tribunal has now ruled that in calculating holiday pay (in respect of the minimum four weeks’ holiday required by EU law), employers must include voluntary overtime, voluntary standby and voluntary call-out payments, provided the work has been ‘sufficiently regular’ to become part of the employee’s ‘normal pay’ (White & Others v Dudley Metropolitan Borough Council).
What to do now?
Other tribunals are not obliged to follow the decisions in Patterson or White but these certainly add weight to arguments that some voluntary overtime (and standby and call-out payments) should be included in the four-week EU minimum statutory holiday pay.
At this stage, it appears that the key question will be whether the payments are sufficiently regular to have become part of normal pay – if you would like advice on whether your employees’ payments are likely to fall into this category, or advice on managing any potential risks, please contact us.
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