Holiday pay –the rules clarified
In November 2014, in the Bear Scotland case, the Employment Appeal Tribunal (EAT) confirmed that overtime payments should be considered when calculating how much employees should be paid during their annual leave.
You can see our article published at the time of the original ruling here: Landmark holiday ruling (2014), an update on the rules here: Holiday pay rules – legal update and our thoughts after a further judgment in 2016: Landmark ruling says holiday pay must include commissions.
The EAT confirmed that compulsory overtime and non-guaranteed overtime could be considered. Non-guaranteed overtime is overtime that an employee is obliged to accept but their employer is not obliged to provide. The EAT did not comment on whether voluntary overtime should also be considered when calculating holiday pay. Given that the majority of overtime that is worked is usually voluntary, the decision left an air of uncertainty over how to assess voluntary overtime.
The EAT has recently answered this question in the case of Dudley Metropolitan Borough Council v Willetts.
In this case the EAT considered whether voluntary overtime, on-call allowances, and out of hours payments should be considered when calculating holiday pay. The decision was that such payments should be considered if they were “normal” payments.
The EAT has confirmed that “normal” payments are those that have been paid over a sufficient period of time on a regular and recurring basis.
The decision goes some way to clarifying what employers need to consider when calculating an employee’s pay whilst they are on holiday. A grey area still exists as to when a payment is deemed as being regular and recurring but employers can no longer simply dismiss voluntary overtime, on call and out of hours payments anymore when calculating holiday pay.
Where it is clear that such payments are made regularly, one option to correctly calculate the rate of holiday pay would be to calculate an employee’s weekly pay as an average of their pay over the proceeding 12 weeks. This should equate to fair amount for both parties.
GA Solicitors has an experienced and specialist team of employment solicitors who can assist with any holiday pay issues or queries. Please do not hesitate to contact either Rob Zacal (01752 513549 / robert.zacal@gasolicitors.com) or Rhiain Lewis (01752 513532 / rhiain.lewis@gasolicitors.com) or please fill in our contact form and one of the team will make contact.
Rob Zacal, Associate