Holiday pay and overtime – more clarification

The Court of Appeal has handed down their judgment in the case of Flowers v East of England Ambulance Trust. The case was brought by ambulance drivers who argued that the calculation of their holiday pay should take into account monies earnt through non-guaranteed and voluntary overtime.

The calculation of holiday pay has been an issue of much debate; a great deal of time has been spent discussing the consistency of UK law, the European Working Time Directive (EWTD) and what is meant by workers being paid “normal remuneration” whilst on paid holiday as required by the legislation.

The courts had previously agreed that compulsory and guaranteed overtime should be taken into account when calculating “normal remuneration”, even when there was a normal working pattern. The issue put to rest in the aforementioned Flowers case was whether the same treatment should be afforded to overtime that was neither guaranteed nor compulsory.

The Court of Appeal held in favour of the ambulance drivers, concluding that where there are normal working hours, normal remuneration does include non-guaranteed and voluntary overtime (provided this overtime is sufficiently regular and paid over a significant period).  It is worth noting that this only applies to statutory paid holiday under Regulation 13 of the Working Time Regulations and not to the additional eight days provided for workers under Regulation 13A, or any other contractual holiday. The provisions of the UK legislation govern paid leave over and above the 20, and so if the workers have normal working hours, their holiday pay calculation for those days does not have to include non-guaranteed nor non-compulsory overtime. Many employers, however, chose to treat additional leave in the same way as the 20 days under the EWTD rather than applying different calculations, which can prove too complex and create more work! Ultimately, however, it’s a commercial decision for employers to make.

Finally, it is worth remembering that from April 2020, the current 12-week reference period used to calculate statutory holiday pay will increase to 52 weeks.

For more information

We have worked with a significant number of providers assisting them to ensure holiday pay compliance – including undertaking audits of existing arrangements and assisting with the implementation of the new ways of working. If you require advice on this issue, please contact Faye Rush.

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