Is voluntary overtime part of ‘normal pay’?
Dudley Metropolitan Borough Council v Willetts and others
Holiday pay calculations continue to cause difficulties for employers, with uncertainty still existing over the question of which elements of workers’ pay should and should not be taken into account.
In the case of Mr Willetts and some of his colleagues, an employment tribunal decided that overtime that was purely voluntary, as opposed to being a contractual right or duty, should be included in the holiday pay calculation because it formed part of ‘normal remuneration’. That was notwithstanding the employer’s argument that voluntary overtime lacked the necessary intrinsic link to the performance of the contractual tasks and so should be excluded.
The Employment Appeal Tribunal (EAT) upheld the tribunal’s decision. Each case will depend on its facts, but the overriding point is that workers are entitled to be paid at least their ‘normal or average remuneration’, otherwise they might be deterred from taking leave. Overtime – whether compulsory, non-guaranteed, or voluntary – counts as remuneration. And to qualify as ‘normal’, the payment must have been paid over a sufficient period of time; items that are usually paid and are regular across time are more likely to count than unusual or exceptional payments.
The EAT went on to consider whether there has to be an intrinsic link between the payment and the performance of tasks required under the contract. It’s not essential, the EAT said, but it can be a decisive factor. If such a link were needed, there was one in this case anyway: if there had been no employment contract, there would have been no voluntary overtime. And in working voluntary overtime, the workers were performing tasks required of them under their contracts.