If employees in your business regularly exceed the number of hours set out in their contract by working overtime, these additional hours may entitle them to increased holiday pay.
An Employment Law case brought by employees of Dudley Council has highlighted the law concerning calculation of statutory holiday pay under the Working Time Regulations, in particular where employees’ actual working hours regularly exceed their “contracted” hours. The case heard by the Midlands Employment Tribunal addressed the question of when and to what extent overtime and other additional working should be taken into account when calculating an employee’s paid leave entitlement under the Regulations.
The Dudley Council tradesmen (plumbers, electricians and carpenters etc.) worked extra voluntary shifts which resulted in them routinely working longer hours over and above the contractual hours contained within their Employment Contracts.
The Working Time Regulations provide that statutory paid leave entitlement should be based upon “a week’s pay”, but Employment Law regarding the inclusion or otherwise of overtime in calculating a week’s pay has been subject to a number of Employment Tribunal decisions over the years.
In the case of the Dudley workmen, they successfully persuaded the Tribunal that their new working patterns (regular overtime etc.) had effectively become the norm and should therefore be used in calculating holiday pay entitlement regardless of the pay level contained within their contracts.
The workers were awarded back pay and secured the right to be paid a higher level of holiday pay in the future.
The decision only applies to the first 20 days leave under the Working Time Regulations. Pay during additional leave over and beyond 20 days will be determined by the Contract.
The law in this area remains complex and it is often sensible for employers to obtain professional Employment Law advice for employers before making any significant changes to your employment working practices and when considering holiday pay calculations.
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