In the recent case of Brettle v Dudley Metropolitan Borough Council an Employment Tribunal has held that voluntary overtime and other payments associated with rotas worked voluntarily should have been included when calculating statutory holiday pay.
The Working Time Directive is implemented in the UK by the Working Time Regulations 1998 (WTR). The WTR provides workers with 5.6 weeks paid holiday each year. Under the WTR, workers are entitled to be paid holiday pay at the rate of “a week’s pay” for each week of holiday. Until relatively recently, it was widely understood that “a week’s pay” should be based on employees’ basic pay and that any additional payments, such as overtime payments and commission, did not have to be included when calculating a week’s pay. However, this changed following the ECJ’s landmark 2011 ruling in Williams and others v British Airways plc, in which the ECJ ruled that holiday pay calculations should include all remuneration which is “intrinsically linked to the performance of the tasks which the employee is required to carry out under his contract of employment”.
In the subsequent case of Bear Scotland Ltd v Fulton, the Employment Appeals Tribunal decided that “non-guaranteed overtime” (i.e. overtime which the employee is obliged to do if asked) should also be included in holiday pay calculations. However, although it seems likely that voluntary overtime should also be included, the position on voluntary overtime is not completely clear. The Brettle case concerned 56 employees who brought claims for unlawful deduction from wages on the basis that their holiday pay had not been paid at the correct rate. The Claimants claimed that their holiday pay should have included an amount in respect of voluntary overtime, voluntary standby allowances and voluntary call-out payments.
The Tribunal upheld the claims, on the basis that although out of hours standby, call-out allowances and overtime was entirely voluntary, the additional payments were intrinsically linked to the work the employees did. The Tribunal took the view that failing to include these payments in holiday pay in circumstances where a worker receives them consistently and regularly might deter workers from taking holiday. However, the Tribunal held that voluntary overtime payments should not be included in holiday pay calculations for one employee who did overtime very rarely. The Tribunal is due to make a further ruling on compensation and it will be interesting to see how the employees’ compensation is calculated.
As this is only an Employment Tribunal decision, it is not binding on other Tribunals, however it is a good illustration of the direction this area of law is heading in. However, as most of the legislation and case law surrounding holidays derives from EU law, the UK position could change as a result of Brexit.