Holiday Pay – what is the position on voluntary overtime?

On 26 June 2015, the Northern Ireland Court of Appeal held that there is no reason why, in principle, voluntary overtime should not be included in the calculation of holiday pay.

In the case of Patterson v Castlereagh Borough Council, a Northern Ireland tribunal rejected an employee’s unlawful deduction of wages claim by finding that voluntary overtime (overtime that the employer is not obliged to provide and the employee is not obliged to perform) should not be included in the calculation of holiday pay. This decision has been welcomed by employers following the ruling in Bear Scotland, the full details of which can be viewed here.

Mr Patterson’s case differed to the workers in the Bear Scotland case. In Bear Scotland, the workers were not guaranteed overtime but were obliged to work overtime if asked to do so. The Employment Appeal Tribunal ruled in this case that obligatory non-guaranteed overtime should be included when calculating holiday pay. In comparison, Mr Patterson’s position was that his overtime was voluntary meaning he could decline to do overtime when it was offered by his employer.

Mr Patterson appealed to the Northern Ireland Court of Appeal (as there is no Employment Appeal Tribunal in Northern Ireland).

On appeal, the Northern Ireland Court of Appeal overturned the tribunal’s decision stating that it was “erroneous” and that there is nothing in principle preventing purely voluntary overtime counting towards holiday pay in some circumstances. Unfortunately, the Court of Appeal did not give specific guidelines as to the test that an employer needs to apply when deciding the calculation of holiday pay and explained that each case would need to be decided on its own facts such as the regularity and permanence of the overtime arrangement.

The decision of the Northern Ireland Court of Appeal is not legally binding on the Courts and tribunals in England and Wales. However, this case may be persuasive authority in England and Wales going forward. The judgment clearly opens the door to the inclusion of voluntary overtime but there is still unsufficient clarity on its application.

Acas have recently published guidance to employers in order to assist them in calculating employees’ holiday pay which can be accessed here .

For advice on how to calculate holiday pay or any other employment law or HR query, please contact our Employment Law and HR team on 0845 050 1958, or alternatively please complete an online enquiry form.