Regular voluntary overtime must be included when calculating holiday pay, the Employment Appeal Tribunal (EAT) has agreed.
Holiday pay is calculated pro-rata, currently 5.6 times your usual working week. The same applies to paid overtime, but this new ruling means any voluntary overtime should be included in the calculation of a worker’s holiday pay.
It is the first definitive ruling of its kind, and employers should take notice of its implications.
The judgment relates to Dudley Metropolitan Borough Council v Willetts and others, where 56 council workers brought employment tribunal claims for unlawful deductions from wages in relation to the calculation their holiday pay.
Each argued that their holiday pay should have included payments for purely voluntary overtime.
While the EAT panel 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”, it ruled that the council workers’ voluntary overtime payments are sufficiently regular to constitute “normal pay”.
It said where the pattern of work extends for a sufficient period of time on a recurring basis to justify the description of “normal”, voluntary overtime pay must be included.
However, each case must be decided on its own facts, and it is up to the individual employment tribunal to determine whether or not overtime payments are sufficiently “regular and settled” to require inclusion in holiday pay, the EAT concluded.