Earlier this year, the Government launched a campaign about holiday pay, stating ‘the onus is on you, the employer, to get this right’. This campaign was partially down to commitments following the Taylor Review and the publication of the ‘Good Work Plan’ and it did help by introducing an online calculator. Understandably, a lot of focus is given to the number of days entitlement, but what about actual holiday pay?

For some time now, there has been confusion over what happens when an employee does overtime, for example, if overtime occurs, must the employer take this into account when holiday pay is calculated?

In a new ruling that could set a precedent around overtime and remuneration for both public and private sector workers, the Court of Appeal found in favour of ambulance crews whose contracts cited various overtime arrangements which hadn’t been considered when calculating holiday pay. The court ruled that voluntary overtime for ambulance workers should be factored into holiday pay allocations, providing such overtime is sufficiently regular to form part of a normal remuneration package.

In this 2017 case, Flowers and others v East of England Ambulance Service NHS Trust, a ruling upheld part of the employees’ complaint and agreed that mandatory and non-guaranteed overtime should form part of their remuneration and holiday pay calculations. However, it was found this should not form part of existing remuneration agreements as ambulance crews weren’t obliged to undertake voluntary overtime. Following an appeal, the Employment Appeal Tribunal (EAT) ruled that voluntary overtime should also be considered when calculating holiday pay, alongside mandatory and non-guaranteed overtime. The EAT recommended that future tribunals should assess similar cases on their own merit to ascertain whether voluntary overtime was paid on regular and/or recurring basis.

In the latest appeal brought by the East of England Ambulance Service NHS Trust, the Court of Appeal upheld the EAT’s ruling. Interestingly, in his judgement, Lord Justice Bean said: ‘The employment tribunal in the present case made no error of law in finding that the remuneration linked to overtime work performed on a voluntary basis could be included in normal remuneration for calculating holiday pay.’

This ruling confirms that, if you have employees that do overtime, you should worry less about whether the overtime is voluntary or mandatory and more about whether it is sufficiently regular and settled. If it is, and your employees rely on these payments as part of their remuneration, you should take it into account when calculating holiday pay.

Given the direction of travel of holiday pay, including the increased promotion of holiday rights by the Government, it is likely more challenges will be made in this area. Therefore if you do pay overtime, or other payments which are beyond the normal salary or hourly pay, now is a good time to reflect on things.

If you would like to discuss this, or anything else HR or Employment Law related, then contact our HR and Employment Law Specialist, David Boland, on the details below:

David Boland
Managing Director
Direct Dial: 01942 292520
Mobile: 07786 376714
Email: david.boland@jshrsupport.co.uk