In June the Court of Appeal ruled that voluntary overtime payments must also be included in holiday pay calculations. It agreed with the Employment Appeals Tribunal’s ruling in the Flowers and others v East of England Ambulance Service NHS Trust case where ambulance workers claimed that two types of overtime should be included in holiday pay calculations; “non-guaranteed” overtime taken when their shifts overrun and any voluntary shifts they choose to take in advance.
The original ruling at Employment Tribunal held that voluntary overtime should not factor into holiday pay calculations, however the ambulance staff successfully appealed this ruling which then resulted in the East of England Ambulance Service NHS Trust taking the case to the Court of Appeal but the judgement ruled in agreement that voluntary overtime should be included in holiday pay if there are regular overtime payments.
When calculating holiday pay it’s important to remember that the following payments must be included in at least 4 weeks of paid holiday:
• Regular overtime payments (both voluntary and compulsory)
• Contractual commission
• KPI bonus payments
This is to ensure that employees’ salaries are not unduly affected when they take holidays and employees are not discouraged from taking their European entitlement of 4 weeks’ annual leave, in other words they should receive the same amount of money as if they had attended for work. This ruling has been in place for some time now, however many employers have not yet implemented it so the government plans to publicise this in the coming year as part of the Good Work Plan so that employees are more aware of their rights.
As part of the Government’s Good Work Plan, recommendations were made to extend the reference period for determining average pay in relation to statutory holiday from 12 weeks to 52 weeks. This is being brought into force by The Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 and will apply from 6th April 2020.
A consequence of this will mean that contracts of employment templates will have to be updated to reflect the changes to holiday pay calculation.
To find out more about holiday pay, how to calculate it and ensure that your contract templates are compliant please speak to a member of the Solve. team