EAT: Voluntary Overtime, Standby Allowances and call-out Payments should be Included in Holiday Pay Calculations if Sufficiently Regular

In the landmark case of Dudley Metropolitan Borough Council v Willetts and others, the Employment Appeal Tribunal (EAT) gave the first binding decision to confirm voluntary overtime should be included in holiday pay.

The case involved 56 council workers employed as tradesmen, who worked their day jobs and also carried out voluntary overtime and other additional duties such as standby shifts and out-of-hours call outs. The regularity of these voluntary duties was decided wholly by the employees, and they were paid additional wages in respect of them, as well as receiving travel and mileage allowances. The workers brought claims in the Employment Tribunal (ET) alleging they were financially disadvantaged by taking leave, as their holiday pay did not take account of these additional payments. The ET decided for the Claimants, and the Council then made an appeal to the EAT.

The EAT reiterated the ET decision, stressing that “normal remuneration” must be included in holiday pay calculations.  It was established that here the voluntary overtime was sufficiently “regular and settled” to constitute “normal remuneration” for these purposes, and therefore should be included in holiday pay calculations. The Tribunal also placed reliance on the fact that the duties carried out by the workers were the same tasks provided for by their contracts of employment, and therefore could be viewed as directly linked.

The case finally provides clear guidance to employers in this area.  Whilst holiday payment calculations must include payment for any compulsory overtime, they may also include payment for voluntary overtime. However, the EAT were explicit in stating each case turns on its facts, and it is a question for the Tribunal to establish whether the voluntary overtime could be considered “regular and settled”.

Following the abolition of Employment Tribunal Fees, it is likely that we will see an increase in Holiday Pay claims and Employers are therefore advised to review their practice in light of this ruling.  For any further assistance, please contact our Employment Team who will be able to provide advice and guidance in this complex area of law.