Should Overtime Be Accounted For In My Holiday Pay?

In anticipation of the Employment Appeal Tribunal’s (“EAT”) imminent decision in the holiday pay cases of Bear Scotland Limited v Fulton & Baxter, Hertel (UK) Limited v Wood & Others and Amec Group v Law & Others, regarding whether voluntary overtime must be taken into account when calculating holiday pay, we thought it appropriate to provide an overview of the legal issues in the case. To assist we will first look at the way holiday pay is currently calculated.

Under the Working Time Regulations 1998 (“The Regulations”) workers are currently entitled to a minimum of 5.6 weeks’ paid holiday each year (inclusive of bank holidays). The first 4 weeks of this are required by the Working Time Directive (“The Directive”). The additional 1.6 weeks are solely provided under the Regulations. The way employers calculate holiday pay varies; however, it is widespread practice not to include voluntary overtime in such calculations. The result is that workers who regularly work voluntary overtime are placed at a disadvantage when taking holiday because they receive less pay than they would if they were not on holiday (and working voluntary overtime). Following recent decisions by the European Court of Justice in Williams and others v British Airways and Lock v British Gas Trading, the question has arisen as to whether such practice is in line with the intentions of current legislation.

In the Bear Scotland v Futon & Baxter appeal, the Tribunal ruled that voluntary overtime must be included in the calculation of holiday pay for the entire 5.6 weeks of holiday provided for under the Regulations. By contrast, in the Hertel (UK) Limited v Wood & Others and Amec Group v Law & Others appeals, the Tribunal ruled that voluntary overtime should be included in holiday pay calculations, but only for the 4 weeks required by the Directive – not the 5.6 weeks provided for under the Regulations.

We would hope that the EAT reject all of the appeals and rule that voluntary overtime must be included in holiday pay calculations. Further, we would hope that the EAT confirm that it should be included for the full 5.6 weeks provided for under the Regulations. In our opinion, any other decision would clearly act as a disincentive to taking holiday for those workers who regularly work voluntary overtime. It is the writer’s opinion that if the EAT confirms that overtime is to be included in holiday pay, it is more likely that it will just be for the 4 weeks required by the directive.

If the EAT confirms that voluntary overtime must be included in the calculation of holiday pay (either for 4 weeks of 5.6 weeks) we would envisage many claims, for unlawful deductions from wages, being commenced in the Employment Tribunals by workers who have not had overtime accounted for in their holiday pay.

If you regularly work overtime (or receive regular pay from your employer that is not part of your ‘basic pay’ e.g. commission, bonuses, shift allowances etc.) and such pay is not accounted for in your holiday pay we would advise you to contact our Employment Right’s Department to seek advice. There are short time limits within which these claims can be commenced so do not delay in contacting us – if you do, you may lose your opportunity. All enquiries should be directed to holiday@morrishsolicitors.com

Tony Ridley

For further information on Employment Rights please visit our website or call 0033 3344 9603 and ask to speak with our Employment Rights team.