The HR Forum

Overtime and Holiday Pay

Hi All,

Following the EAT decision 'Dudley Metropolitan Borough Council v Willetts'  that regular overtime should be taken into consideration with holiday pay, I'm keen to hear if you are your companies are taking any action yet on this matter or if you are waiting to see if an appeal against the ruling goes forward.

We have not calculated our voluntary overtime into our holiday pay previously however I do wonder if anyone is making any changes yet or if you already do take voluntary overtime into consideration yet when calculating holiday pay. 

I look forward to hopefully getting some feedback on this.

Many thanks

Clare

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Replies

  • Morning all

    On the back of the discussions below I found this useful podcast worth a listen as it covers some of the questions below

    All the best Sarah

    http://www.xperthr.co.uk/audio-and-video/podcast-holiday-pay-includ...

    Podcast: Holiday pay includes voluntary overtime | Audio and video | Tools | XpertHR.co.uk
    We discuss the legal implications for employers of the recent EAT decision in Dudley Council v Willets and others, which establishes that regular vol…
  • Hi Clare

    Thanks for posting this.  My view is that given the decision in Lock and Bear that even if an employer waits we probably know what the outcome will be.  I think practically what companies should seek to do now is to review their OT arrangements and try to put practices in places which means the OT is not 'regular'.  Or look at the resourcing arrangements and why OT is necessary and whether more flexible contracts could be introduced to manage the peaks of work?

    Would also be interested to see what practically other organisations are doing.

    I've also included some commentary from PLC which has an interesting take on this to answer your question.

    Kind regards

    Sarah

    Text below from PLC:

    Dudley Metropolitan Borough Council v Willetts

    This decision, which follows the now well-established direction of travel for holiday pay cases, is welcome clarification from the EAT of the position of payments for voluntary elements of work (not merely overtime), highlighting that they are in principle to be treated no differently, for holiday pay purposes, than the compulsory non-guaranteed overtime dealt with in Bear Scotland. In short, they must be included if they are paid regularly or repeatedly over a sufficient period of time to amount to normal remuneration.
    However, some uncertainty does remain. First, the question of whether a payment is "normal" is a question of fact and degree for a tribunal, which means that employers will have to take a view on how they treat borderline cases.
    Secondly, parts of the judgment referring to the "intrinsic link" test are potentially confusing. Paragraph 41 of the judgment suggests that any payment with an "intrinsic link" to the tasks required under the contract would be automatically deemed "normal". When read in conjunction with paragraph 46 (which says that overtime, whether voluntary or compulsory would satisfy the intrinsic link test) this might suggest that even rare instances of overtime would be included because they pass the intrinsic link test. However, paragraph 49 clarifies that the intrinsic link test is focused on "the link between the payment and the performance of duties or work that is normally done".
    Subject to any appeal (the success of which seems unlikely), this case has now resolved the principle area of legal uncertainly arising out of the recent rulings on holiday pay. Anecdotal evidence suggests many employers, even very large companies, have so far largely sat on their hands over the issue. Perhaps this ruling will now give them the certainty to start taking steps to make their approach to holiday pay more compliant. If not, the increased likelihood of litigation following the recent abolition of employment tribunal fees by the Supreme Court may well provide the necessary impetus.
    • Hi Sarah

      So is this saying that in order to remove any likelihood of a tribunal claim all overtime should be included if it is normal however rare it is?  

      Regards

      Pete

      • Hi Pete,

        I know I am not answering your question entirely that you put to Sarah but there is debate around what is 'regular' overtime so if someone is doing overtime and it is rare then my understanding is that this will not be included.

        The main question is defining 'regular' so on another forum, I was reading that an easy example is that if someone does 2 hours and then nothing else, that would not be classed as regular whereas someone else doing 4 x 1/2 hour weekly then even though it is still 2 hours that would be considered regular.

        It will be interesting to see how people are going to handle this unless/until even clearer guidance comes out. 

        I am due to sit down next week to see as a business how we are going to handle this moving forwards.

        Hopefully it won't become a major admin nightmare!

        Regards
        Clare

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