
It is important to remember that when it comes to selling services, you must deliver on your promises.
Background
The Working Time Regulations confirm that workers are entitled to be paid during statutory annual leave at a rate of a week's pay for each week of leave. Under EU law, holiday pay must correspond with ‘normal remuneration’.
Two well-publicised cases, Lock v British Gas Trading Ltd (Case C-539/12) and Bear Scotland Ltd v Fulton (UKEATS/0047/13), have already confirmed that commission and non-guaranteed overtime should be included in the calculation of holiday pay where they constitute ‘normal remuneration’.
However, until the Dudley case, there had been no definitive guidance on whether the same principle should extend to entirely voluntary overtime.
Facts
A group of 56 employees claimed that they had not received the correct rate of statutory holiday pay. Each employee had set contractual hours, but they also volunteered to perform additional duties that their contracts of employment did not require them to carry out. The additional work was done by the employees voluntarily, with the Council having no right to enforce the additional work.
The employees contended that their holiday pay calculation should include the voluntary overtime.
Judgment
The EAT echoed the decisions in Lock and Bear Scotland and concluded that, even where overtime is entirely voluntary, it should be included in the calculation of holiday pay where voluntary overtime pay is part of an employee’s normal remuneration.
Comment
What is important for employers to take away from this case is the definition of ‘normal remuneration’.
In her judgment, Simler P helpfully set out guidance on what ‘normal’ means in this context:
The EAT also gave an example that: “a payment is normally made if paid over a sufficient period of time on a regular basis, say for one week each month or one week in every five weeks, even if it is not paid more frequently or even each week”.
Put simply, 'normal pay' is that which is normally received. The key question suggested by the EAT is: what would the worker have earned if they had not taken leave?
We are of the view that:
We recommend that employers review their holiday pay arrangements to ensure that any additional ‘normal’ payments on top of base salary are included in their calculations. To help you, we have developed a fixed-fee audit offer where we can review your arrangements and provide commercial advice on any required changes.
In addition, we have produced a fixed-fee toolkit that sets out the legal position and provides guidance to achieving compliance. To purchase a copy of our toolkit, please email Lynsey Harrison, or contact her on 0121 214 3615.
For more information on holiday pay or anything else discussed in this article, please get in touch with your usual contact in our Employment Team or speak to Rebecca Reid. Please visit our website to find out more about our employment work.
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