UK Employment Appeal Tribunal Confirms
That Statutory Holiday Pay Should Include
Voluntary Overtime
1 August 2017
One of the last remaining pieces in the jigsaw of what constitutes
“normal pay” for the purpose of calculating statutory holiday pay was
completed by the Employment Appeal Tribunal (EAT) yesterday when it
confirmed that such calculations should include voluntary overtime.
Willetts and Others v. Dudley Metropolitan Borough Council is a claim
for unlawful deductions from wages by five lead claimants in respect
of 56 employees. The Employment Tribunal (see “Holiday Pay in the UK
− the great unanswered question”) had previously found that out-of-
hours standby payments, call-out allowances, the taxable elements of
travel allowances (mileage payments) and regular additional voluntary
overtime should be considered as part of a week’s pay for most of the
lead claimants for the purpose of calculating statutory holiday pay. In
its view, the payments were intrinsically linked to normal work, paid in
such a manner and (for those individuals) with sucient regularity to be
considered a part of their normal remuneration.
Dudley MBC unsuccessfully appealed the decision to the EAT. The EAT
rejected its suggested exclusion of payments for voluntary work which
is normally undertaken as an “excessively narrow interpretation” of
normal pay, which could give rise to a “fragmenting of pay into dierent
components to minimise levels of holiday pay”. In the EAT’s view, that
would result in the risk of a worker suering a financial disadvantage
that might deter him from exercising the right to take leave, contrary to
the underlying objective of the Working Time Directive. The EAT noted
that whether a payment is “normal” is a question of fact and degree.
It concluded that “a payment is normally made if paid over a sucient
period of time on a regular basis, say for one week each month or one
week in every five weeks, even if it is not paid more frequently or even
each week”.
The EAT also reduced the importance in the earlier case law of
establishing an intrinsic link between the payment and the performance
of the tasks required under the contract when deciding if a payment
is part of normal pay. In the EAT’s opinion, such a criterion is “a [its
emphasis] decisive criterion but not the or the only decisive criterion”.
So, where does this latest decision leave employers? The European and
UK courts have already established that non-guaranteed overtime and
commission payments should be included when calculating pay for the
EU Working Time Directive-derived four-week minimum holiday leave.
It will come as no surprise to many that a similar approach has now
been confirmed in relation to voluntary overtime. But that still leaves
the question of exactly how you assess normal pay – what is “sucient
regularity” for these purposes? With respect to the EAT, being told that
this is a question of “fact and degree” is hardly helpful when you are
inputting the payroll.
When faced with a tribunal claim in relation to what constitutes
“normal pay” for the purpose of calculating statutory holiday pay, we
would continue to advise employers to ask their tribunal to consider
the question from Williams: “has the employee been put at a financial
disadvantage through going on the holiday for which the underpayment
is claimed?” If he cannot get past that, we would say that issues of
what constitutes normal pay, etc., should not arise.
It is also worth remembering that there is a two-year backstop
period that applies to most unlawful deduction from wages claims,
meaning that a tribunal can only look back two years from the date of
the complaint when considering unlawful deductions. The EAT also
confirmed its May 2017 Bear Scotland decision that any gap of three
months or more between unpaid EU Working Time Directive holiday
leave breaks the series of deductions for the purposes of a claim in the
tribunal.
We have a national “Holiday Pay Taskforce” comprising some of
the leading experts on this subject. If you would like to discuss any
questions relating to holiday pay and what it means to your business,
please speak to your usual contact or alternatively a member of our
Holiday Pay Taskforce.
Contacts
David Whincup
T +44 20 7655 1132
Andrew Stones
T +44 113 284 7375
E andrew[email protected]
Alison Treliving
T +44 161 830 5327
Charles Frost
T +44 121 222 3224
The contents of this update are not intended to serve as legal advice related to individual situations or as legal opinions
concerning such situations, nor should they be considered a substitute for taking legal advice.
© Squire Patton Boggs.
All Rights Reserved 2017
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27511/08/17
