Voluntary overtime may need to be included in holiday pay calculations

Holiday pay and how it should be calculated remains one of the most hotly debated questions in the world of employment law.  The Northern Ireland Court of Appeal has recently added to this debate by suggesting that it may be necessary to include an amount to cover overtime pay that the employee would miss by being on holiday, even where there is no obligation to work any overtime and they do so on a completely voluntary basis. 

As we reported in January, the Employment Appeal Tribunal has previously ruled in Bear Scotland v Fulton that non-voluntary overtime should be included in many cases, but there has been a lack of clarity on when this obligation arises.  In the Bear Scotland case, the employees in question were obliged to work overtime and did so pretty much every week.  So it appears sensible that they should receive holiday pay equivalent to the pay they would normally receive (including overtime).

What it all boils down to is that staff should receive their normal week's pay for a week's holiday.  If they have contracted hours and stick to those every week, then their normal pay is clear.  If they work overtime pretty much every week, then it is likely that will need to be taken into account when working out holiday pay (by taking an average of their pay over the 12 weeks preceding the period of holiday).

Where overtime is worked on a much more sporadic basis, then it may be possible to argue that holiday pay should just be the basic pay with no adjustment for overtime. It could be argued that they often work just their basic hours and receive their basic pay for those weeks, so they are not losing out by being paid the same amount for a week's holiday.

It seems unlikely that we will ever receive an exact answer to this question from the courts; they will always decide on these sorts of matters based on the specific facts of the cases brought before them.  As an employer, therefore, you need to consider whereabouts on the spectrum of overtime plus basic hours your staff fall and decide on the best approach accordingly.  Please get in contact with us if you would like any further advice on this matter.