Voluntary overtime should be included in holiday pay - Unite Legal Services secures another ground breaking victory on holiday pay

fan of money with two five pound notes in focus

In November 2014, the Employment Appeal Tribunal in the case of ‘Bear Scotland & Others’, involving 16 Unite members, decided in a landmark ruling that regular overtime, which employees have to perform if asked by the employer, should be included in the calculation of holiday pay, as workers should be paid their normal pay.

Prior to this decision, an employee who regularly worked overtime of this kind would only receive a basic rate of pay for each days annual leave and not at a rate which reflected their average earnings, resulting in them in being ‘short changed’. 

The ‘Bear Scotland’ case was a huge success and it changed years of unfairness regarding overtime. But the question of whether genuinely voluntary overtime needed to be included was not formally resolved, as the Unite members in that case could be forced by the employer to work overtime.

However, in May 2016, Unite Legal Services secured compensation for its member, Mr Butt, who brought a claim against his employer on the basis that the calculation of his holiday pay should have included pay for overtime hours that he volunteered to work.

The employer was not obliged to offer overtime, and Mr Butt was not required to work it when it was offered.

Despite Mr Butt raising a grievance, the employer refused him a fair and average rate of pay for payment of his annual leave and he therefore pursued a claim.

The Butt v Advel case was heard in the Liverpool Employment Tribunal and was the first case of its kind that Unite Legal Services had pursued that reached a final hearing and had the issue decided by a tribunal.

Employment Judge Shotter stated the following in her Judgment: “The respondent has breached regulation 16 of the Working Time Regulations 1998 by failing to include in its calculation of holiday pay… voluntary overtime worked by the claimant. 

“The tribunal found that voluntary overtime was carried out month in month out, there was a regularity and normality to the work carried out by the claimant.

“It was submitted by the respondent that there was no intrinsic link between the voluntary overtime carried out by the claimant and the job the claimant was carried out to do. The tribunal did not agree, accepting the claimant’s evidence.”

In future cases involving voluntary overtime and holiday pay, it will be up to the individual tribunal to determine whether the overtime was normally carried out by the worker, and be an “appropriately permanent feature” of the worker’s remuneration to trigger its inclusion in holiday pay calculation.

As Mr Butt’s claim was determined by an Employment Tribunal, the decision is not binding in other courts and tribunals in England, Wales and Scotland. However, it will be cited in holiday pay cases in those jurisdictions and will be highly persuasive.

Unite’s executive director for legal, membership and affiliated services, Howard Beckett, said: “Since our groundbreaking case in 2014, Unite Legal Services’ position has remained firm that all regular payments, voluntary or otherwise, should be included in members’ holiday pay since they should be paid their normal pay. This ruling confirms our position that voluntary overtime should be included in holiday pay. 

“Whilst Unite would prefer to resolve holiday pay issues without the need to protracted litigation, employers should be under no illusion that Unite Legal Services will do whatever it takes to ensure that our members receive their full entitlement.”