Calculating holiday pay new ET decision on voluntary overtime

Last year, we reported on a decision of the Northern Ireland Court of Appeal that voluntary overtime might have to be included in the calculation of statutory holiday pay if it was a sufficiently permanent feature of remuneration. It is therefore no great surprise, save that one might have expected it to come sooner, that an English Employment Tribunal (“ET”) has come to a similar conclusion in the case of Brettle and others v Dudley Metropolitan Borough Council.

Brettle involved test cases taken from claims made by 56 employees of Dudley Council that certain payments should have been included in the calculation of their holiday pay under the Working Time Regulations 1998 (“WTR”). Those payments included out-of-hours standby payments, call-out allowances, the taxable elements of travel allowances and voluntary overtime. The ET accepted that all such payments could be included in the holiday pay calculation.

In coming to this decision, the ET rejected arguments put forward that voluntary overtime was not part of normal remuneration where it was “truly voluntary and could be refused” and was “special” - attracting a special rate of remuneration. Instead, the ET decided that, regardless of the nature of the work, the test is “what is normal pay?” It was also mindful of previous court findings that employees should suffer no disadvantage when taking leave, as this may deter them from taking it.

The ET concluded that voluntary overtime should be included in holiday pay for two of the test claimants, one of whom undertook such overtime every Saturday, and the other on regular but not all Saturdays. The ET found against only one one claimant on the basis that he only rarely undertook voluntary overtime and, as such, it could not be considered part of normal pay.

With regard to the out-of-hours standby payments, the ET similarly found that these should be included in holiday pay as they were “normal” where the claimants had regularly been on standby (which was almost always either one week in four or one week in five).

The ET also concluded, in line with comments made in previous cases, that when considering statutory annual leave it should be assumed that the four weeks deriving from EU law is taken first, followed by the 1.6 weeks of additional holiday entitlement that is purely domestic in origin. This is relevant because the case law which decided that holiday pay should include all “normal remuneration” made it clear that this only applies to the EU part of the entitlement. The extra 1.6 weeks is calculated according to the provisions of the WTR, which essentially provide a right to basic pay.

We do not know whether this decision will be appealed and it is interesting to note that the ET did not address the relevant statutory provisions in any detail. As a first-instance decision it is not binding on other courts or tribunals, but it does indicate the likely approach they will take to the issue of voluntary overtime and other regular payments - although the particular facts of each case will always be relevant.