FOCUS ON THE UK: Holiday pay update FOCUS ON THE UK: Holiday pay update

FOCUS ON THE UK: Holiday pay update
16 Nov 2017

FOCUS ON THE UK

 Holiday pay update: The of voluntary overtime

 By Emma Bartlett, partner, Charles Russell Speechlys  LLP

 At last there is some clarification for employers on how voluntary overtime she is calculating holiday pay. The Employment Appeals Tribunal (EAT) has deters form part of "normal pay" in the same way that compulsory and non-gruarar the decision in the Bear Scotland case in 2014) currently does.

 Since the 1970s, it has been established that compulsory overtime should be included in assessing what a "week's pay" means for holiday pay purposes. The EAT considered in 2014 that non-guaranteed overtime should be treated in the same way on the basis that holiday pay must correspond to "normal remuneration". In other words, non-guaranteed overtime payments should be included if made sufficiently regularly to fall within this

definition. Although the definition of "sufficiently regular" was left undetermined by the EAT, cases concerning the inclusion of a regular bonus and commission payments have been somewhat helpful in guiding employers as to what it meant.

 For instance, non-guaranteed overtime payments must relate to work that is intrinsically linked to the contract, or in other words, to work that is within the scope of the employment contract. But the situation in relation to voluntary overtime was left open to speculation until an August 2017 EAT decision in in the Dudley Metropolitan Borough Council v Willetts case. Unless successfully appealed, this decision will bind subsequent Employment Tribunals.

 Deterred from taking holiday

 Fifty-six employees who carried out housing maintenance for the Council claimed they had not received the correct amount of holiday pay. The overtime under debate was purely voluntary and could not be enforced by the employer, but both the Tribunal and the EAT found that payment for

it was sufficiently regular to be considered part of "normal remuneration". If the voluntary overtime had not been included, the EAT concluded that some employees WU could have been "deterred from taking holiday" because of their reduced pay levels.

This case followed the judicial rulings in the Williams v BA cases, which ended up at the European Court of Justice. Here pilots argued that they were entitled to certain additional payments on top of their basic pay when they took holiday. The idea again was that, if employees did not receive their "normal pay" during holiday times, they would be deterred from using their full entitlement, thereby undermining the health benefits that annual statutory holiday is intended to provide. The requirement to include these

additional payments only apply to the four weeks of paid holiday that derives from European Union law, however, and not to the additional 1.6 weeks for which the Working Time Regulations allow. What this situation means then is that employers

should, once again, revisit the holiday payments

issue and, where voluntary overtime payments are made, assess whether they are paid sufficiently regularly to be part of "normal remuneration". You will very quickly find that the dividing line is not always simple to judge.

 

Emma Bartlett advises on all aspects of employment law including unlawful discrimination, whistleblowing, equal pay, unfair dismissal, breach of contract, restrictive Covenants, protecting Confidential information, board room disputes, holiday pay and

TUPE. She has experience in obtaining and executing interim injunctions against former employees who have breached confidentiality and/or restrictive covenant provisions. With a strong record in negotiating and resolving complex employment disputes, Emma is considered a skilled deal broker. She is a specialist in contentious discrimination matters and has significant experience in handling high value contentious claims for employers and senior individuals.

 

FOCUS ON THE UK

 Holiday pay update: The of voluntary overtime

 By Emma Bartlett, partner, Charles Russell Speechlys  LLP

 At last there is some clarification for employers on how voluntary overtime she is calculating holiday pay. The Employment Appeals Tribunal (EAT) has deters form part of "normal pay" in the same way that compulsory and non-gruarar the decision in the Bear Scotland case in 2014) currently does.

 Since the 1970s, it has been established that compulsory overtime should be included in assessing what a "week's pay" means for holiday pay purposes. The EAT considered in 2014 that non-guaranteed overtime should be treated in the same way on the basis that holiday pay must correspond to "normal remuneration". In other words, non-guaranteed overtime payments should be included if made sufficiently regularly to fall within this

definition. Although the definition of "sufficiently regular" was left undetermined by the EAT, cases concerning the inclusion of a regular bonus and commission payments have been somewhat helpful in guiding employers as to what it meant.

 For instance, non-guaranteed overtime payments must relate to work that is intrinsically linked to the contract, or in other words, to work that is within the scope of the employment contract. But the situation in relation to voluntary overtime was left open to speculation until an August 2017 EAT decision in in the Dudley Metropolitan Borough Council v Willetts case. Unless successfully appealed, this decision will bind subsequent Employment Tribunals.

 Deterred from taking holiday

 Fifty-six employees who carried out housing maintenance for the Council claimed they had not received the correct amount of holiday pay. The overtime under debate was purely voluntary and could not be enforced by the employer, but both the Tribunal and the EAT found that payment for

it was sufficiently regular to be considered part of "normal remuneration". If the voluntary overtime had not been included, the EAT concluded that some employees WU could have been "deterred from taking holiday" because of their reduced pay levels.

This case followed the judicial rulings in the Williams v BA cases, which ended up at the European Court of Justice. Here pilots argued that they were entitled to certain additional payments on top of their basic pay when they took holiday. The idea again was that, if employees did not receive their "normal pay" during holiday times, they would be deterred from using their full entitlement, thereby undermining the health benefits that annual statutory holiday is intended to provide. The requirement to include these

additional payments only apply to the four weeks of paid holiday that derives from European Union law, however, and not to the additional 1.6 weeks for which the Working Time Regulations allow. What this situation means then is that employers

should, once again, revisit the holiday payments

issue and, where voluntary overtime payments are made, assess whether they are paid sufficiently regularly to be part of "normal remuneration". You will very quickly find that the dividing line is not always simple to judge.

 

Emma Bartlett advises on all aspects of employment law including unlawful discrimination, whistleblowing, equal pay, unfair dismissal, breach of contract, restrictive Covenants, protecting Confidential information, board room disputes, holiday pay and

TUPE. She has experience in obtaining and executing interim injunctions against former employees who have breached confidentiality and/or restrictive covenant provisions. With a strong record in negotiating and resolving complex employment disputes, Emma is considered a skilled deal broker. She is a specialist in contentious discrimination matters and has significant experience in handling high value contentious claims for employers and senior individuals.