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Calculating holiday pay – voluntary overtime
Following the recent Bear Scotland case, it is clear that regular required overtime needs to be reflected in holiday pay – however there was no explicit binding authority in respect of voluntary overtime. Against this backdrop, the Northern Irish case of Patterson v Castlereagh Borough Council has now applied the principles set out in previous cases and has held that there is no reason in principle why voluntary overtime should not be included in holiday pay.
The original tribunal in this case held that voluntary overtime (i.e. overtime not obliged to be offered by the employer or obliged to undertaken by the employee), should not be included in holiday calculations. The decision was appealed to the Northern Ireland Court of Appeal.
The Court of Appeal overturned the tribunal’s decision stating it was erroneous. However rather unhelpfully the Court did not provide guidance as to the tests the employer needs to apply when determining holiday pay.
The Judgment states that it will be a question of fact in each case whether or not the voluntary overtime includes the necessary features to be included in holiday pay. The overtime must normally be carried out by the worker and be an “appropriate permanent feature” of the worker’s remuneration to trigger its inclusion in the holiday pay calculation.
Although decisions in the Northern Ireland Courts of Appeal are not binding on the courts and tribunals in England and Wales, it will undoubtedly be a persuasive authority and indeed reflects the principles set out in earlier cases.
Employers should note the increasing likelihood that voluntary overtime, if worked sufficiently regularly to be a normal part of pay, must be factored into holiday pay. It is generally better to review pay structures prior to a challenge and, if you are concerned about yours, we would be happy to give you our view.