"If we took a holiday...it would be, it would be so nice..."

It’s holiday season: and the question for many employees is “How much holiday pay will I get?”. Working out holiday pay isn’t too tricky if an employee receives a regular rate of pay, but the treatment of overtime - which might be guaranteed, non-guaranteed or completely voluntary - is complex. The Court of Appeal’s recent decision in East of England Ambulance Service NHS Trust v Flowers provides more clarity.

The employees were engaged in the provision of ambulance services. Overtime was often worked, both non-guaranteed (requested by the employer) and completely voluntary (requested by the employee). They brought employment tribunal claims alleging unlawful deductions from their holiday pay and argued that their holiday pay should be higher, to take account both of non-guaranteed overtime and voluntary overtime pay.

The employer conceded that in accordance with the Working Time Directive, the non-guaranteed overtime should have been taken into account when calculating holiday pay, but it argued that the voluntary overtime should be ignored. The Court of Appeal disagreed: it found that an earlier Employment Appeal Tribunal decision (Dudley Metropolitan Borough Council v Willetts) was correct meaning that voluntary overtime which extends over a sufficient period of time on a regular and/or recurring basis should be included when calculating basic holiday pay for the four weeks’ statutory holiday entitlement provided under the Working Time Directive.

Interestingly, the court commented that excluding voluntary overtime from holiday pay calculations would carry the risk of encouraging employers to set artificially low levels of basic contractual hours and to categorise the remaining time as ‘overtime’. It observed that the current trend in the UK towards zero-hours contracts showed this was not a fanciful but very real concern.

If you regularly pay overtime to your employees, you should review your holiday pay arrangements to take the above principles into account.