Holiday Pay: the saga continues

It’s well established that workers are entitled to receive their “normal remuneration” during the four weeks of annual leave under the Working Time Directive. However, what constitutes “normal remuneration” has, and continues to be, somewhat of a grey area.

Case law confirms that “normal remuneration” should include anything intrinsically linked to the performance of the tasks which the worker is required to carry out under the contract of employment. The Employment Appeal Tribunal (EAT) has already confirmed that contractual commission payments and non-guaranteed overtime payments (where the employer is not obliged to provide the overtime, but the worker is obliged to work it if requested) should form part of such “normal remuneration”. However, the issue of voluntary overtime payments has only recently been addressed by the Tribunals in England and Wales.

In Brettle v Dudley Metropolitan Borough Council ET/1300537/15, the Employment Tribunal was required to consider whether voluntary overtime, voluntary standby allowances and voluntary call-out payments should have been included when calculating holiday pay. The Tribunal found that a number of the voluntary payments had been made with sufficient consistency and regularity to be properly described as forming part of “normal remuneration” and should therefore have been included by the Council when calculating holiday pay. Interestingly, the Employment Tribunal also relied upon the fact that workers shouldn’t be deterred from taking leave in its reasoning.

We also understand from the Unite Legal Services website that the issue of voluntary overtime and holiday pay was dealt with by the Liverpool Employment Tribunal in the case of Butt v Advel. While we have not had sight of the judgment (this was again an Employment Tribunal, rather than an EAT judgment) we understand that the Tribunal reached a similar decision to that reached in the Dudley case finding that there was both regularity and normality to the voluntary overtime carried out by the Claimant and as such the employer had breached the Working Time Regulations by failing to include this in its calculation of holiday pay.

Whilst it’s important to note that Dudley and Butt are only Employment Tribunal decisions and therefore non-binding, the cases are nevertheless very useful in terms of demonstrating the Tribunals’ approach to holiday pay calculations and the direction of travel on this issue. It’s becoming increasingly clear that the key question is whether the remuneration is such that is “normally” received, a question that has not been examined or elucidated upon in any detail so far. When deciding this question the Tribunal will look at the individual facts of the case and in particular the frequency and regularity with which the payment is made. Hopefully more guidance will follow.

The issue of voluntary overtime payments will need to be considered by the EAT before it becomes binding. However, the decision is likely to give those employers who are not already including regularly worked voluntary overtime in holiday pay real food for thought.