Voluntary overtime and Holiday pay calculations – the latest

Calculating holiday pay is one of the more complex aspects of being an employer. Many UK employment lawyers will have advised on the different scenarios that arise – and the question of whether voluntary overtime should be included in the calculation for holiday pay has now been considered by the employment Appeal Tribunal. Much to the relief of employment claim solicitors, this decision brings more clarity to this complex area of employment law.

Calculating holiday pay – a week’s pay

Most top employment solicitors are familiar with the holiday pay calculation - one of the more complex aspect of the Working Time Directive – given effect in UK law in the Working Time Regulations 1998. The key concept in calculating holiday pay is that of a week’s pay. For workers working a fixed working week with no additional aspects such as commission or overtime, the calculation of a week’s pay is straightforward. For those on shift work, as any UK employment lawyer will tell you, it can be more complicated, with the holiday pay calculation being based on average hours worked over the previous 12 working weeks. It’s also important to make sure all elements of ‘pay’ are included in the calculation. 

The Employment Tribunal distinguishes voluntary overtime and non-guaranteed overtime

Mr Flowers and his colleagues worked for the East of England Ambulance Trust in different roles relating to the provision of ambulance services. Under their contracts of employment, they could be offered ‘non-guaranteed’ overtime and voluntary overtime. 

Non-guaranteed overtime arose when an employee was engaged in a task at the end of a shift – for example handling a call to the emergency services or caring for a patient who needed an ambulance. The shift overruns out of necessity – and the individual employee would be expected to complete the task in hand, in return for payment. So although irregular, when non-guaranteed overtime arose, it was mandatory that the employee worked it.

Voluntary overtime was overtime that could be offered to employees, but it was agreed in a statement of facts that 

“21. None of the Claimants are or have ever been required or expected to volunteer for overtime shifts and all of the Claimants are and have always been completely free to choose whether or not to work any voluntary overtime shifts.”

In other words, unlike non-guaranteed overtime, there was no requirement to work voluntary overtime when it arose.

The claims for holiday pay 

In this case, the employees brought both contractual claims, and claims under the Working Time Directive (as the employer is a public body they could rely directly on the EU legislation) that both non-guaranteed overtime and voluntary overtime should be included in their holiday pay calculations. In the Employment Tribunal, the East of England Ambulance Trust conceded the claim under the Working Time Directive on non-guaranteed overtime. This was following the case of Bear Scotland Ltd v Fulton. The Employment Tribunal upheld the employees’ contractual claim for non-guaranteed overtime but dismissed the claims regarding voluntary overtime. It agreed with the East of England Ambulance Trust that voluntary overtime was in a different category to non-guaranteed overtime.

The decision of the employment Appeal Tribunal on the Working Time Directive claim

The employment Appeal Tribunal (EAT) had the benefit of the decision of the EAT in another case, Dudley Metropolitan Borough Council v Willetts which was decided after the Employment Tribunal made its decision in the Flowers case. In Willetts, the EAT decided that voluntary overtime did fall within the definition of ‘normal remuneration’ for holiday pay calculations. The EAT in this case did not agree with the employer’s arguments that either the EAT had misinterpreted European case law in deciding Willetts, or that the decision of Willetts was wrong on the facts. 

The EAT disagreed with the employer Trust’s arguments. The judge highlighted the principles set out in the Willetts decision, in particular, an overarching principle that is that “normal remuneration must be maintained in respect of the period of annual leave guaranteed by Article 7”. On that basis, any voluntary overtime payments would be included in normal remuneration provided they were paid for “a sufficient period of time on a regular and/or recurring basis to justify the description “normal”.  Applying that to the case before it brought by Mr Flowers and his colleagues, the EAT found that likewise, voluntary overtime should be included in the holiday pay calculations provided that it had been paid over a sufficient period of time. As this is a matter of fact, it was referred back to the Employment Tribunal on this point.

The contractual claim also succeeded

The employer had cross appealed the decision on non-guaranteed overtime, and the employees had appealed the decision on the contractual claim for voluntary overtime. The EAT looked at the relevant section of the contract and concluded that the relevant contractual clause in the NHS contract had to be read as a whole – and that as such “Its objective intention is to maintain the overall level of remuneration which the employee would have received if working.”. There was no basis for distinguishing between non-guaranteed and voluntary overtime, and both should be included in the calculation of holiday pay.

OTS solicitors are London employment law solicitors with experience of handling all aspects of HR and employment law, for employers and employees. We offer contentious and non-contentious advice and support, including HR training and work on employment contracts and staff documentation and settlement agreements. To book an appointment to discuss any aspect of employment law with one of our top employment solicitors, please contact 0203 959 9123.

 

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