Voluntary overtime may need to be included in holiday pay

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Summary: Voluntary overtime may be included when calculating an employee's holiday pay, according to a decision from the Northern Ireland Court of Appeal.

In Patterson v Castlereagh Borough Council, the Northern Ireland Court of Appeal has held that voluntary overtime – that is, overtime which does not have to be offered by the employer or accepted by the employee – may need to be included in the calculation of holiday pay.

In doing so, the Court of Appeal held that the Northern Ireland Industrial Tribunal had been wrong to find that voluntary overtime should not, as a matter of principle, be included in holiday pay. The Tribunal had erroneously interpreted the earlier EAT decision in Bear Scotland v Fulton which did not explicitly deal with voluntary overtime but instead focussed on non-guaranteed overtime (that is, overtime which does not have to be offered by the employer but if offered must be worked). On appeal, the Court held that, provided the voluntary overtime payment was part of the employee’s “normal remuneration” and was paid with sufficient regularity, there was no reason why it should not in principle be included in the calculation of holiday pay.

This decision is not a surprising one as the Industrial Tribunal’s judgment was widely considered to have been wrongly-decided given the direction of travel of earlier holiday pay cases.  However, it is also worth noting that the point was decided partly on the basis of a concession made by the Council, meaning that the Court of Appeal gave a deliberately short judgment and acknowledged that the issue may be considered in more detail on another occasion.

What does this mean for other UK employers?

Although this decision is not binding on the English courts, it will have persuasive authority in the rest of the UK. It does therefore open the door for other employees to argue for the inclusion of voluntary overtime in their holiday pay. Again this is not a surprising outcome but it is worth remembering that each case will be determined on its facts and with reference to the employee’s particular circumstances and the pattern of work undertaken.

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