Employers should be aware of the recent decision in Dudley Metropolitan Borough Council v Willetts (and others) that payments made for the overtime may now form part of “normal remuneration” for the purposes of calculating holiday pay.
Under the Working Time Directive, holiday pay must equate to “normal remuneration”. In Dudley the Employment Appeal Tribunal (EAT) upheld an earlier tribunal’s decision, and concluded that “normal remuneration” can include payments for voluntary overtime.
The case concerned 56 employees who brought claims for unlawful deduction of wages based on the calculation of their holiday pay. The employees worked set contractual hours, but also regularly worked voluntary overtime which meant they were paid additional call-out payments and mileage and standby allowances. The employees argued these additional payments should be taken into account when calculating their holiday pay.
The EAT drew on the decision of the European Court of Justice in the cases of Williams and others v British Airways plc and Lock v British Gas Trading Ltd, reiterating that the overarching principles where holiday pay is concerned is that workers should not be deterred from taking annual leave, and should not be at a financial disadvantage for taking annual leave, and therefore “normal remuneration” must be paid.
The EAT confirmed that in order for a payment to be considered as “normal” it must be made regularly and over a sufficient amount of time, but this is a question of fact. The employees in this case were seen to work overtime regularly, and therefore the EAT decided the additional remuneration was part of their “normal remuneration”.
The decision goes further than the earlier case of Bear Scotland Ltd and others v Fulton and others  IRLR 15, which confirmed that non-guaranteed overtime (where the employer is not required to provide overtime, but the employee is required to work the overtime if requested to do so) should be taken into account when calculating holiday pay.
Following Dudley, employers should be mindful of any employees who frequently work overtime on a voluntary basis, and ensure that their holiday pay reflects “normal remuneration”, which put simply is remuneration normally received.