Calculating Holiday Pay - what should be included?
Author: Elizabeth Parkin
Applies to: England, Wales and Scotland
This article looks at the judgment of Brettle & Others v Dudley Metropolitan Council regarding the calculation of holiday pay, what it should include and what counts as 'regular' payment.
Employment Judge Warren has handed down judgment in Brettle & Others v Dudley Metropolitan Council which, although a first instance decision, provides an interesting addition to a line of cases concerning calculation of holiday pay, whereby employees receive additional payments such as overtime or standby allowances.
In this case, Judge Warren took a clear stance on the issue of voluntary overtime, something which the prominent cases of Lock and Bear Scotland did not address. He also offered some guidance on what may be considered to be a 'regular' payment. In this article, we explore these interesting developments in further detail.
The Tribunal heard from five lead claimants (there being 56 claimants in total) employed by Dudley Metropolitan Council in the repair and improvement department for social housing. They are tradesmen with a variety of skills including roofing, plumbing and electrical work, each of whom work different types of voluntary overtime and/or were on stand-by/on-call rotas on a 'regular' basis, receiving payments for these additional hours when worked (but not whilst they were on annual leave).
This unsurprising judgment confirms the established position regarding taxable travel allowances, standby payments and call out payments. It goes on to state however, that regular voluntary overtime (that which is not occasional, unusual, rare or ancillary) can be considered 'normal pay' for the purposes of calculating holiday pay. Two of the employees in question carried out regular overtime on Saturdays: Mr Cree working every Saturday for the previous few years; and Mr Woolvin working regular Saturdays although not every week.
Mr Cree acknowledged that his Saturday overtime was voluntary, however, he viewed it as an extension of his normal working week, having worked Saturdays for several years. Mr Woolvin's position differed slightly, in that his overtime was less frequent albeit still regular. His job description included an expectation that such overtime would be worked and, as such, his overtime was even more intrinsically linked to his normal work duties. Both of these types of overtime were held to be part of 'normal pay'.
Furthermore, in examining the out of hours standby payments made to a number of the claimants, Judge Warren concluded that payments made over a number of years at a rate of one week in four, or one week in five, with occasional variation, fall clearly within the Working Time Regulations and the case law definition of normal pay. Although the claimants could choose to leave the rota arrangement, and in that sense their involvement remained voluntary, they received the pay consistently and regularly and to not pay the amount may 'deter them' from taking their holiday entitlement.
Judge Warren re-iterated that the question of whether a payment is 'intrinsically linked to normal work, paid in such a manner and with such sufficient regularity to be considered part of normal remuneration' is fact specific. Thus, whilst each case will turn on its own facts, it is of note that the regularity of the payments in this case fell clearly within the ambit of normal pay.
It will therefore be for employers to decide whether they take a risk averse approach and include such voluntary payments in their calculations going forward or wait for this issue to be decided at a higher level in the Employment Appeal Tribunal before taking such steps.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.