Our next case is about holiday pay. Holiday pay is governed by Regulation 16 of the Working Time Regulations 1998 which states workers are entitled to be paid a week’s pay for each week of leave. This was perceived to mean basic pay.

However, the interpretation of Sections 221-224 of the Employment Rights Act, which determine a week’s pay for purposes of holiday pay calculations, was challenged in a series of cases including Neale v Freightliner, Lock v British Gas and Fulton v Bear Scotland.

These cases held that contractual commission and contractual/mandatory overtime should be included in holiday pay calculations, so the worker is paid normal pay whilst on annual leave. The case of Dudley Council v Willets took this one step further and held that regular voluntary overtime should be included too.

The question in this case is:

Should voluntary overtime be included in holiday pay calculations?

Flowers, one of multiple Claimants, worked for East of England Ambulance Trust, the Respondent, an emergency services provider to the East Midlands. The Respondent paid Claimants two types of overtime: over-run and voluntary.

Over-run was when an employee’s shift overran because they were performing a task, such as transporting a patient to a hospital, that they could not leave incomplete before the end of their shift. Voluntary overtime was, as its name suggests, completely optional but many of the Claimants undertook it in varying degrees of regularity, many irregularly.

Following the decisions in Fulton v Bear Scotland and Lock v British Gas, the Claimants initiated ET proceedings to include their over-run and voluntary overtime into holiday pay calculations. The ET held that the over-run pay should be included in holiday pay calculations but voluntary overtime should not.

The Claimants appealed and the EAT allowed the appeal. The EAT held that if the overtime had been paid for a sufficient amount of time then it should be included in holiday pay calculations even if it was not a regular pattern of overtime hours.

The takeaway point:

Yes, this case has gone one step further than Dudley Council v Willets and now means voluntary overtime should be included in holiday pay calculations even if it is irregular pattern provided it has been paid over a sufficient period of time.

Similar to the first case for calculating NMW pay, employers will need to take a more individual approach to see which employees’ voluntary overtime qualifies as normal pay as the time sufficiency will vary from person to person.