Holiday pay: non-guaranteed and voluntary overtime
23 July 2018
The Employment Appeal Tribunal (EAT) has ruled on whether NHS employees should have their holiday pay calculated to include nonguaranteed and voluntary overtime.
Flowers and others v East of England Ambulance Trust  UKEAT/0235/17
The NHS Terms and Conditions of Service stipulates that holiday pay is calculated on the basis of what an employee would have received had he or she been at work, based on the previous three months of work. A group of employees brought a claim against the Trust for unlawful deductions of wages, arguing that their holiday pay should be calculated to include both non-guaranteed (compulsory) overtime and voluntary overtime. The employees claimed a contractual entitlement to this calculation under the NHS Terms, as well as an entitlement under the Working Time Directive (WTD) for holiday pay to correspond to ‘normal remuneration’.
An employment tribunal agreed that the claimants’ holiday pay should be calculated to include payments for non-guaranteed overtime (this was conceded by the Trust as being required by the WTD), but rejected the claim that it should include voluntary overtime.
The EAT upheld the claimants’ appeal in relation to voluntary overtime and the calculation of holiday pay under the WTD. With reference to the EAT’s previous decision in the case of Dudley Borough Council v Willetts, the exclusion of payments for voluntary overtime would offend the overarching principle under the WTD that normal remuneration must be maintained in respect of the period of annual leave. The EAT has remitted the case to the tribunal to determine whether each individual claimant had a sufficiently regular and settled pattern of voluntary overtime to be included in the calculation of ‘normal remuneration’.
In relation to the claimants’ contractual claim, the EAT was satisfied that there was no basis to distinguish between non-guaranteed and voluntary overtime under the NHS Terms. Holiday pay should be calculated to include all the overtime an individual had worked in the preceding three months.
This decision will have potentially far-reaching and costly consequences for NHS employers, since those engaged under the NHS Terms and Conditions of Service will be able to rely on the EAT’s decision in relation to the contractual claim, irrespective of the requirement under the WTD for voluntary overtime pay to be paid with sufficient regularity to be regarded as ‘normal remuneration’.
For non-NHS employers, this decision follows the previous EAT decision in Willetts, reiterating that voluntary overtime payments should be included in the calculation of holiday pay provided such overtime forms a sufficiently regular and settled pattern of work.
The Trust is seeking permission to appeal the EAT’s decision to the Court of Appeal.
This article is from the July 2018 issue of Employment Law Update, our monthly newsletter on employment legislation and regulation. To download the latest issue, please visit the newsletter section of our website. Law covered as at July 2018.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at July 2018.