Further Complications in Calculating Holiday Pay: Voluntary Overtime

In Autumn last year, the Court of Appeal confirmed that holiday pay must include compensation for any results-based commission that would ordinarily be earned by a worker in Lock and another v British Gas Trading Ltd (No.2) [2016] IRLR 946.

In a decision that will further increase the costs to businesses in paying holiday pay, the Employment Appeal Tribunal have determined that voluntary overtime should be included when calculating holiday pay, providing it is normally worked.

In Dudley Metropolitan Council v Willetts UKEAT/0334/16/JOJ, the Respondents were Rapid Reaction Operatives for Dudley MC and regularly worked voluntary overtime. The EAT found that as the overtime was regularly worked, it should form part of their “normal or average remuneration” and if the employees were only paid their basic remuneration, they would be disadvantaged by taking holiday leave.

As such, if your employees regularly work overtime, whether that be compulsory, non-guaranteed or voluntary, you will have to included when calculating your employees holiday pay.

Greystone Legal can advise you upon the correct way to calculate holiday pay and put systems in place to manage the holiday requests. Contact us today for further information.

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