Holiday Pay: What Must Be Included?

BlogCareer Advice Posted: Thursday 26th May 2016 by

When you are calculating holiday pay, what should you take into account?

Until now, the answer was accepted to be: you should take into account only the employee’s standard basic pay. A recent case brought by 56 tradesmen, all members of UCATT, has overturned that view by establishing that voluntary overtime, voluntary standby and voluntary callout payments count as normal pay and should be included in holiday pay calculation, if they are undertaken with sufficient regularity.

It would have been helpful if the presiding judge had taken time to define sufficient regularity, but that will have to wait to be tested in some future case. There are, however, some suggestions from interested lawyers that the cautious employer will want to take into account.

The claimants were represented in court by Jonathan Gidney, a barrister at St Philips Chambers, who says that, while once every six months might not qualify as regular overtime, once a quarter would. Whether the courts will see things the same way, only time will tell.

In the case in question, the tradesmen were employed by Dudley Metropolitan Council. The council invited them to work on the council’s social housing stock on Saturdays, on what was described as a purely voluntary basis. In addition, they were on standby every four weeks to deal with emergency callouts and repairs. In each of these cases, the decision to work or not work was theirs and not the employer’s. The barrister said, “A lot of these guys were getting an extra £725 each month for their week on standby and they effectively relied on overtime payments to make up their pay.” These arrangements had been in place for long enough and with sufficient regularity to become part of their normal work and, therefore, part of their normal pay.

The council argued that these additional payments did not form part of contractual pay, but the judge disagreed; under regulation 13 of the Working Time Regulations, payment for that work must be included in calculating holiday pay for the first 20 days of annual leave.

This decision demands that employers revisit the generally understood way of calculating holiday pay. Until this case, the understanding was that only contractual or guaranteed overtime must be included. That position wavered a little when the Northern Ireland Court of Appeal held, in Patterson v Castlereagh Borough Council [2015] IRLR 721, that voluntary payments were not necessarily excluded. The balance of opinion has now moved further towards the need to include voluntary overtime, provided it is sufficiently regular.

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