Voluntary overtime must be included in holiday pay

The Employment Appeal Tribunal (EAT) has ruled that voluntary overtime must be included when calculating holiday pay.

The EAT dismissed an appeal by Dudley Metropolitan Borough Council against Mr G. Willetts and others which included 56 council employees working as electricians, plumbers, roofers, storemen, operations officers, and quick response operatives. These workers had brought employment tribunal claims for unlawful deductions from their wages with regard the way in which their holiday pay was being calculated, arguing that the calculations should include payments for voluntary overtime. The EAT’s ruling endorses the decision made in this case by the employment tribunal.

The EAT accepted that staff could “drop on and off the rotas to suit themselves whether day by day, week by week, month by month or permanently” with additional working being “almost entirely at the whim of the employee”.

The tribunal stressed that ‘normal pay’ must be included in holiday pay calculations, and that the overtime payments that were being made by the Council were regular enough to be regarded as ‘normal pay’.

This means that if employees regularly voluntarily work overtime, and this pattern of work is consistent over a sufficient period of time, then voluntary overtime pay must be included when calculating holiday pay.

However, it remains at the discretion of employment tribunals to decide on individual cases as to whether voluntary overtime is “regular and settled”, meaning it should be part of holiday pay calculations.

In light of this ruling, businesses who engage workers that voluntarily work overtime on a regular basis are advised to revise holiday payments accordingly.