Voluntary overtime and holiday pay
A group of NHS employees brought claims in the Employment Tribunal (ET) for unlawful deductions from their wages, arguing that their holiday pay failed to take into account overtime falling into two categories:
- Non-guaranteed overtime, where at the end of a shift, an employee was in the middle of a task which must be seen through to completion i.e. dealing with a call to emergency services; and
- Voluntary overtime, where there was no requirement or expectation to volunteer for this, and individuals were entirely free to choose whether or not to work these shifts.
The Claimants asserted a contractual entitlement under their NHS terms and conditions of service and the requirement under Article 7 of the Working Time Directive (WTD) for their holiday pay to correspond with their ‘normal remuneration’.
The ET held that non-guaranteed overtime should be taken into account when calculating holiday pay, however, the voluntary overtime was not part of the Claimants’ normal remuneration so this type did not need to be taken into account.
The Claimants appealed to the Employment Appeal Tribunal contending that voluntary overtime should have been taken into account when calculating holiday pay; the Trust cross-appealed against the finding that non-guaranteed overtime should have been taken into account.
The Trust argued that the sole test of whether a payment constitutes normal remuneration is the existence of an “intrinsic link” with the performance of the tasks required under the contract of employment. The EAT disagreed, saying that this failed to take into account the ‘normal remuneration’ principal where elements of pay that are sufficiently regular or recurring to qualify as ‘normal’ must be included. The EAT stated that payments for voluntary work which is normally undertaken should not be excluded as a matter of principle.
The Trust appealed to the Court of Appeal (CoA). The CoA began by analysing the Claimants’ contractual entitlement and held that the EAT was right to concluded that voluntary overtime was to be taken into account for the purpose of calculating holiday pay. There was no basis for distinguishing between voluntary and non-guaranteed overtime payments, and an omission of an express reference to overtime within the Claimants’ contractual clause did not represent a deliberate decision to exclude it from holiday pay calculations. As such, the natural interpretation was that overtime forms part of pay. The Trust’s appeal was dismissed.
It seems that this case is likely to call into question the threshold of regularity and whether a particular worker’s voluntary overtime meets that requirement. While there will be obvious cases at either end of the spectrum, it is likely there will be a large grey area in the middle which may draw the battleground for the next round of holiday pay cases.
On a practical level, it may be simplest for some employers to routinely include all overtime payments in their holiday pay calculations, on the basis that the administrative (and potentially legal) costs of differentiating between individual employees’ overtime patterns could be too high or complex.
East of England Ambulance Service NHS Trust v Neil Flowers and ors  EWCA Civ 947