Health Warning:  If you have staff who regularly do voluntary overtime, you may have a holiday black hole.

A recent decision of the Employment Tribunal (Neal v Freightliner Limited) has put a very large cat amongst very many pigeons.  The issue concerns the calculation of holiday pay and whether or not it should include voluntary overtime. 

Workers are entitled to receive their normal remuneration when taking holiday.  Traditionally this has been considered to include payments for guaranteed overtime but not for any overtime undertaken voluntarily.  The recent case of Neal v Freightliner Limited however, has turned this on its head.  The Tribunal decided that holiday pay should include remuneration for normal working hours including any voluntary overtime. 

The rationale for this decision is that the European Court of Justice determined in the case of British Airways Plc v Williams (which was not concerned with overtime) that holiday pay should include any remuneration ‘intrinsically linked to the performance of the task [which they were contracted to do]’.  On the basis of that, the ECJ determined in Williams that a pilot’s holiday pay should include their flight supplements.  In the case of Neal v Freightliner Limited the Employment Tribunal considered that decision in the context of voluntary overtime and determined that when doing voluntary overtime, the employee was doing the same job that they did during their core hours and therefore, the remuneration for voluntary overtime was ‘intrinsically linked to the performance of the task’. 

The consequences of this Judgment are huge because the potential for a claim by employees for back payments is enormous.  Employees can assert a claim for unlawful deductions from wages in respect of holiday pay dating back to 1 October 1998 when the Working Time Regulations came into force or from the date that they started employment, whichever is the later.  As an example; an employee who has been working for 10 years has a contract that provides for payment of £10 an hour for 35 hours a week.  However, they usually do voluntary overtime of at least 15 hours a week at a rate of pay of £15 an hour.  That means that the employee’s normal weekly remuneration was £575 but during a week when they were on holiday, they were only paid for ‘core hours’ i.e.: £350.  Following the Freightliner case, that represents a shortfall of £225 a week for up to 4 weeks of holiday a year and over a 10 year period, that’s a claim worth £9,000.

If anyone needs advice they should contact Linky Trott at linky.trott@edwincoe.com.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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