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Employment Tribunal holds overtime must be included in holiday pay

7th October, 2013

In the recent case of Neal v Freightliner Ltd ET/1315342/12, the Employment Tribunal held that in light of European Law, overtime must be taken into account when calculating statutory holiday pay for the four weeks’ minimum statutory annual leave as provided for by the Working Time Directive (“WTD”).

Although the WTD states that workers are entitled to four weeks’ minimum paid annual leave, it does not specify how holiday pay for this period should be calculated. The WTD confirms that this is determined by national legislation and/or practice. In the case of Robinson-Steele v RD Retail Service Ltd [2006] ICR 932, the European Court of Justice (“ECJ”) held that “paid annual leave” in Article 7 means that workers on holiday should receive their “normal remuneration”. The case of Williams and others v British Airways plc [2011] IRLR 948 expanded on this definition of “normal remuneration” to include not only basic salary but also remuneration “intrinsically linked to the performance of the tasks” that the individual is required to carry out under their contract of employment.

The WTD is implemented in Great Britain through the Working Time Regulations 1998 (“WTR”). This provides workers with the right to take 5.6 weeks’ paid holiday in each leave year. Regulation 16 of the WTR states that holiday pay must be calculated using the definition of a “week’s pay” for each week of holiday as is found in the Employment Rights Act 1996 (“ERA”). Overtime is disregarded under these provisions for the purposes of calculating holiday pay. It was decided in Williams that regulation 16 of the WTR should be amended so that the provisions relating to overtime in the ERA are not applicable to holiday pay.

The Claimant, Mr Neal, argued that in light of Williams, he should have been paid overtime when his employer calculated his statutory holiday entitlement. The Judge recognised that during overtime the Claimant was actually performing tasks required of him under his contract of employment. Although he may have volunteered for the overtime, this did not mean it was not intrinsically linked to the performance of his tasks. The Tribunal therefore held that his overtime hours, pay and related premium should be included in the holiday pay calculation.

The decision to include payments of voluntary overtime when calculating statutory holiday pay is important; however it is not binding. We therefore await consideration of this matter from the higher courts. In the meantime, employers should consider taking overtime into account when calculating holiday pay for its workers.

For further information or advice relating to holiday pay, please contact Helen Watson on 01244 405565 or send an email to [email protected]

 

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