Voluntary overtime should have been included in holiday pay
Voluntary overtime and other payments associated with rotas worked voluntarily should have been included in employees’ statutory holiday pay.
An employment tribunal has found that pay for voluntary overtime, standby allowances, call-out allowances and mileage payments made in respect of work done voluntarily should have been included in statutory holiday pay for the basic four week holiday entitlement provided under the Working Time Regulations 1998 (WTR). On the facts of this case, they all formed part of normal pay. However, in the case of one claimant who worked voluntary overtime only rarely, overtime pay did not form part of normal pay and did not have to be included.
In Brettle v Dudley Metropolitan Borough Council, five lead claimants brought an unlawful deduction from wages claim in respect of 56 Council employees. They argued that voluntary overtime pay, standby allowances, call-out allowances and mileage payments made in respect of work done voluntarily should have been included in their holiday pay.
The employment tribunal noted that there is no binding case law dealing with purely voluntary overtime but case law on holiday pay indicates that employees should receive normal pay so that they are not deterred from taking holiday. The test therefore is what is normal pay?
Only two of the lead claimants worked voluntary overtime. One worked it every Saturday and the other worked it only rarely. The employment tribunal ruled that overtime pay should have been included in holiday pay for the former (where it formed part of normal pay), but not the latter (where it did not).
The employment tribunal concluded that although the work was entirely voluntary, the out of hours standby allowance formed part of normal pay. It had been paid to each of the claimants over a period of years, at a rate of one week in four or one week in five. Failure to pay it may have deterred a worker from taking leave.
The employment tribunal noted that whilst this was a voluntary rota, once an employee was on it they were required to attend any call out. The allowance was intrinsically linked to the work required of them and arose out of the employment. The remuneration received was therefore normal pay.
The employment tribunal noted that the travel rate was paid at a higher rate than that recognised by HMRC. It was not therefore purely a reimbursement of expenses and instead there was an element of a benefit in kind. It ruled that the part of the allowance that was subject to tax as a benefit in kind was part of normal pay.
4 or 5.6 weeks?
The employment tribunal went on to confirm that these elements should only be included when calculating holiday pay for the basic four week leave entitlement under the WTR. They did not need to be included when calculating holiday pay for the additional 1.6 week’s holiday provided under the WTR or any additional contractual holiday entitlement. It also observed that it is for the employer to decide when the basic leave is taken and in the absence of any stipulation to the contrary, it will be deemed to be taken first.
Although the decision in this case will not be binding on other employment tribunals, it gives an indication of the sorts of pay and allowances that might form part of normal pay and have to be included in holiday pay, following on from the high-profile cases on this subject in the European Court of Justice and Employment Appeal Tribunal in recent years. It is unfortunate that the regularity of voluntary overtime worked were at the two extremes of the spectrum. However, the employment tribunal clearly accepted that standby and call-out payments made once every four or five weeks were sufficiently regular to form part of normal pay. How a tribunal will approach payments which are not quite as regular remains to be seen.
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