Voluntary overtime must be included in holiday calculations

In the long running holiday pay saga, we already have binding court decisions that confirm holiday pay must be based on normal pay, including contractual overtime (i.e. overtime that an individual was required to work or guaranteed under the contract).

In the most recent court decision of Dudley Metropolitan Borough Council v Willetts and others, the Employment Appeal Tribunal held that voluntary overtime that is normally worked should be included when calculating an employee’s holiday pay for the 4 week annual leave entitlement.

The EAT did note however that whether a payment is received regularly enough to count as ‘normal’ is a question of fact and degree

As voluntary overtime payments are the most common form of overtime, many employers have been waiting for a binding decision on whether to include this in holiday pay calculations, prior to making any changes and highlighting this issue.

This is now a binding decision and something we strongly recommend addressing in order to calculate holiday pay correctly.

However, it should be noted that these payments will only need to be included in statutory holiday pay calculations where they are made with ‘sufficient regularity’ to count as ‘normal remuneration’.

There is no guidance on what ‘sufficient regularity’ means but it is likely to be regular if there is a consistency or pattern of payments, of a value to affect overall holiday pay, over the course of the holiday year.