Should Holiday Pay Calculations Take Into Account Voluntary Overtime?

Posted on 9th August 2018

The Employment Appeal Tribunal (EAT), has recently had to consider whether voluntary overtime should be taken into account when calculating employees’ holiday pay (Flowers and others v East of England Ambulance Trust).

Mr Flowers and a number of his colleagues (the Claimants), claimed that the ambulance service was in breach of its obligations under contract and statute by not including both compulsory and voluntary overtime when calculating the rate at which holiday pay should be paid. 

In the first instance the Employment Tribunal decided that the voluntary overtime did not have to be taken into account, on the basis that it was non-contractual and there was no regular pattern to it and that it did not form part of normal remuneration.

On appeal, the EAT disagreed. As far as statutory holiday pay was concerned, the EAT considered previous case law and noted that the overarching principle was that, during periods of statutory leave, normal remuneration had to be maintained. Furthermore, if a payment had been paid over a sufficient period of time, it would fall into the category of ‘normal remuneration’.  In the circumstances the Claimants were entitled to have voluntary overtime factored into the calculation of statutory holiday pay.

Of course, many employees have holiday entitlements that are greater than the statutory minimum. As far as the present case was concerned the EAT decided, on the facts of the case, that the Claimants were also contractually entitled to have voluntary overtime taken into account when calculating their contractual holiday pay. 

It is likely that the ambulance service will appeal the decision of the EAT. However, pending any further clarification on the legal position (particularly with regards to statutory holiday pay), employers in a similar position may need to look at their holiday pay arrangements and consider possible financial contingency plans. 
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