Holiday pay update – status quo

On 10 June 2019, the Court of Appeal in East of England Ambulance Service NHS Trust v Neil Flowers and others reaffirmed the position established in Dudley Metropolitan Borough Council v Willetts and others (previously covered in our blog update). The position is that normal remuneration must be maintained whilst an employee is on annual leave and this includes voluntary overtime where a pattern of voluntary overtime is sufficiently regular and settled, such that it must be factored into the calculation.

Background to the case

In 2017, a group of NHS ambulance workers brought employment tribunal claims for unlawful deductions from holiday pay, arguing that the calculation of holiday pay had omitted to take into account non-guaranteed overtime and voluntary overtime.

In the initial 2017 ruling, the Employment Tribunal found that non-guaranteed overtime should be accounted for when calculating holiday pay, but voluntary overtime should not as NHS ambulance workers were not obliged to carry out voluntary overtime and it did not form part of their existing remuneration agreements. On appeal, the Employment Appeal Tribunal (EAT) held that voluntary overtime should be factored into account when carrying out holiday pay calculations, together with mandatory and non-guaranteed overtime. The EAT also stated that voluntary overtime is an integral part of normal remuneration provided it is paid over a ‘sufficient period of time’. The claim was remitted back to the Employment Tribunal to determine whether each claimant had had a pattern of voluntary overtime that was sufficiently regular and settled to be taken into account in the calculation of his or her ‘normal remuneration’.

The Trust appealed to the Court of Appeal. The Court of Appeal took the view that the EAT was right to conclude that the NHS ambulance workers’ contracts required voluntary overtime to be taken into account for the purposes of calculating holiday pay. It further agreed that there is no basis for distinguishing between voluntary and non-guaranteed overtime payments for this purpose. The Trust’s appeal was therefore dismissed.

Has anything changed?

No. The position remains as before in that employers must exercise caution when calculating holiday pay to ensure that all relevant factors contributing to employees’ ‘normal’ remuneration are taken into account. If anyone has any questions regarding this judgment or any other issues in respect of the calculation of holiday pay, please contact Elliot Francis, or any member of the Employment team.

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