Regular voluntary overtime must be factored into statutory holiday pay, appeal tribunal rules


7 August 2017

The Employment Appeal Tribunal (EAT) has ruled that payments made for voluntary overtime that is normally worked must be included when calculating holiday pay for the first four weeks of holiday under the Working Time Regulations.

The EAT drew a distinction between overtime that is normally worked and paid, and overtime which is exceptional or which is usually unpaid. The key question is whether overtime can properly be said to form part of an individual’s normal pay. For a payment to count as ‘normal’ it must have been paid on a regular and/or recurring basis over a sufficient period of time. This will be a question of fact and degree in each case. Overtime worked one week in every five was considered sufficiently regular in this case. In contrast, items which are not usually paid or are exceptional do not have to be factored into holiday pay.

Subject to any appeal, the ruling clarifies an issue left undecided by previous EAT decisions. The decision makes it clear that, for holiday pay purposes, overtime that a worker undertakes voluntarily is treated in the same way as overtime that a worker is obliged to do when asked by their employer (but which the employer does not guarantee to provide) ie if it is worked and paid on a regular basis it is included in holiday pay but if overtime work or pay is exceptional then it is not.

Marc Meryon, Partner
e: marcmeryon@eversheds-sutherland.com
t: +44 207 919 0900