The Employment Appeal Tribunal (EAT) upheld the decision of Employment Tribunals that payments for voluntary overtime should be included in holiday pay if they are regular enough to constitute ’normal pay’.  The Employment Tribunal accepted that employees could “drop on and off the rotas to suit themselves whether day by day, week by week, month by month or permanently” and additional work was “almost entirely at the whim of the employee, with no right to enforce work on the part of the employer”.

In the case of Dudley Metropolitan Borough Council v Willetts and others, an Employment Tribunal decided that out of hour’s standby pay, call out allowance, voluntary overtime and travel allowance linked to those elements should be included within holiday pay calculations.  The 56 council workers argued that their holiday pay should have included, payments for voluntary overtime.  The tribunal stressed that “normal pay” must be included in holiday pay and concluded that the council workers’ voluntary overtime payments are sufficiently regular to constitute “normal pay”.

The EAT confirmed that, where the pattern of work extends for a sufficient period of time on a recurring basis to justify the description “normal”, voluntary overtime pay must be included in holiday pay, however, each case must be decided on its own merits, and it is up to individual Employment Tribunals to determine whether or not the overtime payments are sufficiently “regular and settled” to require inclusion in holiday pay.

The impact of the decision will be felt by all employers who operate overtime payments and approaches to calculating holiday may need to be reassessed once again.  The individual circumstances that apply to your workforce and your business will ultimately govern what approach is best for you, therefore before making any decisions as to the risks you face, take advice on what it might mean for you and your staff.