Overtime and calculating statutory holiday pay

Although the “holiday season” is drawing to a close a recent case in the Employment Tribunal has demonstrated that a business should have taken a worker’s paid overtime into account when calculating their annual leave entitlement. This is not (yet) a binding decision but one that employers should be aware of.

The decision turned on the outcome of a separate case in which, under EU law, it was confirmed that workers taking statutory holiday are entitled to receive their “normal remuneration”. The same case outlines that “normal remuneration” includes not only basic salary but also remuneration “intrinsically linked to the performance of the tasks” that they are required to carry out under their contracts.

In the current case the Employment Judge noted that the claimant was, throughout his overtime periods, performing tasks that he was required to do under his contract. The fact that he might have “volunteered” to perform those tasks outside his contracted hours did not mean that his overtime pay was not “intrinsically linked” to the tasks he was required to carry out under his contract of employment.

Accordingly, his overtime hours in addition to his normal pay should have been included in his holiday pay calculation.

This case is of interest, hopefully not just to lawyers such as me(!), as it highlights a conflict between the Working Time Regulations (UK legislation) and the provisions of the Working Time Directive (EU legislation). The current case was resolved by the Judge applying a purposive interpretation of UK legislation to give effect to the EU Directive (i.e. by inserting a caveat into the UK legislation so that it did not fall foul of the EU Directive.

For the time being employers are not bound by this recent decision but it seems only a matter of time before the Employment Appeal Tribunal and the higher courts have the opportunity to consider the matter; hopefully they will resolve the conflict between what the EU Directive says that the UK legislation should say and what the UK legislation actually says so that UK employers and employees know where they stand.

Paid holiday allowance

Remember – a business must allow its workers 5.6 weeks’ paid holiday each year which is equivalent to 28 days for a full-time worker (to work this out simply multiply the days of work by 5.6).

Neal v Freightliner Ltd ET/1315342/12

David Dixey is Holmes & Hills Solicitors Employment Law expert and provides Employment Law advice to employers across Essex and Suffolk.