The law surrounding the calculation of holiday pay is in a state of evolution. The starting position is that employees are entitled to receive ‘normal remuneration’ during periods of annual leave. However what is considered ‘normal remuneration’? It seems it is a fluid concept at the moment.
Last year the decision in Bear Scotland established that the types of payments that should be considered ‘normal remuneration’ include:
- Commission payments.
- Guaranteed and non-guaranteed overtime payments.
- Standby payments
- Emergency call-out payments.
- Bonuses for attendance and performance (excluding bonus’s that are based on service or departmental performance rather than individual, unless taking holiday will negatively affect the bonus payment).
- Acting-up payments.
- Allowances that go beyond repayment of expenses
However there are anticipated changes to this on the horizon. The most recent development in this area has come following the case of Patterson v Castlereagh Borough Council (2015) decided by the Northern Ireland Court of Appeal.
The decision was by no means definitive and merely established that, in principle, it is possible for voluntary overtime payments to be included as part of an employee’s ‘normal remuneration’ for the purposes of the Working Time Regulations (Northern Ireland) 1998 (which are substantively the same as the Working Time Regulations 1998 (SI 1998/1833)). Therefore, if an employer is under no obligation to offer and an employee is under no obligation to accept overtime but on occasions an employee works overtime on an entirely voluntary basis, this can be taken into account when calculating the employee’s holiday pay.
This issue has now been referred back to the Employment Tribunal in Northern Ireland to make a decision on the specific facts of this case. It is hoped that once this point is clarified practical guidance on this issue will be provided by the resulting judgment.
Although a Northern Irish case, the judgement is still relevant to English cases given the current ambiguity on this subject. This decision suggests that a move to extend the law so that payments for wholly voluntary overtime will be included in holiday pay calculations is likely. It will however continue to be a question of fact for each tribunal to determine whether or not overtime is ‘normally’ carried out and whether overtime pay can properly be described as forming part of ‘normal remuneration’ for these purposes.