Employers must include pay for regular voluntary overtime when calculating holiday

The Court of Appeal has confirmed in Flowers v East of England Ambulance Trust that employers should include pay for regular voluntary overtime when calculating holiday pay. This ensures that workers receive their normal pay whilst on holiday. The ruling applies only to the basic four week statutory holiday entitlement. Employers do not have to include pay for voluntary overtime when calculating holiday pay for the additional 1.6 weeks’ statutory holiday entitlement or any additional contractual entitlement.       

What is the disagreement between the Employment Tribunal and Employment Appeal Tribunal over treatment of voluntary overtime?

The claimants worked in a range of roles for the ambulance service. As part of their work, they frequently worked overtime. Some of the overtime was voluntary. They claimed the Trust should include overtime pay when calculating their holiday pay. The employment tribunal disagreed in respect of voluntary overtime. It ruled the Trust did not have to include it as it did not form part of normal pay.  

The claimants appealed successfully to the Employment Appeal Tribunal (“EAT”). It ruled that employers should include pay for voluntary overtime if they pay it regularly over a sufficient period of time.  

The Trust appealed to the Court of Appeal.

What was the impact of the Court of Appeal decision that voluntary overtime has to be included?

The Court of Appeal upheld the EAT’s decision. 

Holiday pay must correspond to a worker’s “normal remuneration”, so workers receive the same pay when on holiday as they do when working. Payments form part of a worker’s “normal remuneration” if they are paid regularly or repeatedly over a sufficient period. This is a question of fact and degree. 

What are the long term implications of the ruling?

The decision in this case means that voluntary overtime is no different from other forms of overtime.  When calculating holiday pay, employers have to include pay for all overtime if they pay it regularly or repeatedly over a sufficient period of time that it forms part of normal pay.

The decision upholds the EAT decision in Dudley Metropolitan Borough Council v Willetts and others. In that case the EAT approved the employment tribunal’s ruling that a claimant who worked voluntary overtime every Saturday should have overtime pay included in his holiday pay but another who worked it only rarely should not.

It is not just overtime pay that employers have to include. Employers need to consider what other elements of their workforce’s pay are sufficiently regular to amount to “normal remuneration”. This could include, for example, commission, shift allowances, standby allowances and productivity bonuses.