Holiday Pay Clarified

Posted on by Thomas Carroll

In our latest brief Thomas Carroll Employment Law discuss the recent case of Dudley Metropolitan Borough Council v Willetts on the question of holiday pay. 

The Employment Appeal Tribunal (EAT) recently made a significant decision in the case of  Dudley Metropolitan Borough Council v Willetts on the question of holiday pay. It upheld an Employment Tribunal’s decision that entirely voluntary overtime should be included in normal remuneration for calculating holiday pay.

Dudley Metropolitan Borough Council engage a number of workers to repair and improve its housing stock, who have set contractual hours. However, due to the nature of their roles, they undertake on-call and additional overtime work that is purely voluntary and the Council has no contractual right to enforce overtime working.

A number of employees brought claims in the Employment Tribunal for unlawful deductions from wages in relation to the calculation of their holiday pay. They argued that their holiday pay should be calculated as an average payment and not on basic hours. They argued that overtime (even if it was voluntary) out-of-hours standby payments and call-out allowances should be taken into account when the council is calculating their holiday pay.

The Tribunal followed previous decisions and held that “regular” overtime is normal pay and must be included in holiday pay. The Tribunal further decided that the mere fact that the overtime was voluntary did not prevent it from being included in the calculation.  It also concluded that regular out-of-hours standby payments and call-out allowances should be included in holiday pay too.

On appeal the Employment Appeal Tribunal upheld this decision. This is now a binding decision that (on the facts of this case) entirely voluntary overtime should be included in holiday pay and employers that offer voluntary overtime will need to consider whether or not their overtime payments are sufficiently “regular and settled” to require inclusion in holiday pay.

A Definitive Guide to Holiday Pay Workshop

If you would like further information on this complicated issue, Thomas Carroll Management Services will be holding ‘A Definitive Guide to Holiday Pay’ workshop on Thursday, 23rd November 2017.

To reserve a place, please contact Lauren Dickinson via email or call on 02920 853794

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