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Overtime and holiday pay

Napthens - July 23rd 2018

Last month ACAS issued new guidance on overtime. The guidance focuses on the three types of overtime, these being: voluntary, compulsory guaranteed and compulsory non-guaranteed.

Voluntary overtime is, as the name suggests, entirely voluntary and there is no obligation on the employer to offer overtime, nor is there any obligation on the worker to accept any offer of overtime. Therefore, any workers who refuse should not be subject to a detriment as a result. Guaranteed compulsory overtime is where the employer is obliged to offer overtime and likewise the worker is obliged to accept the work. Finally, non-guaranteed overtime is where there is no obligation on the employer to provide overtime, but where they do the worker must accept the work.

So what should a worker be paid for working overtime? There is no legal right to be paid at a higher rate for any overtime worked. Any agreement in relation to pay should be clearly detailed within their contract of employment, so as to avoid any potential issues further on down the line. Where overtime is worked, this should be paid at at least the National Minimum Wage rate appropriate to the individual worker. Alternatively, some employers may elect to instead offer time off in lieu for any overtime worked.

Overtime will have an impact on the amount of holiday pay that a worker will receive during periods of leave. In the recent case of Flowers v East of England Ambulance Trust the Employment Appeal Tribunal (EAT) considered whether voluntary overtime should be included when calculating holiday pay.

The claimants were all members of various ambulance crews and had clauses within their contracts relating to non-guaranteed and voluntary overtime. However, both types of overtime were not regularly worked by these individuals.

Considering last years’ ruling in Dudley Metropolitan Borough Council v Willets, the EAT found that, where voluntary overtime forms part of normal remuneration over a sufficient period of time, then it should be taken into account when calculating holiday pay.

Therefore, employers should ensure that, where they have workers who work any form of overtime, whether it is voluntary, compulsory guaranteed or non-compulsory guaranteed and which is worked regularly over a sufficient period of time that it is taken into account when calculating holiday pay.