Holiday pay: Voluntary overtime

The summer has finally arrived and lots of employees are jetting off to enjoy their summer holidays. Whilst employees are off sunning themselves in some tropical paradise, employers are left with the somewhat tricky task of figuring out their holiday pay. Now, due to a recent Case, voluntary overtime may need to also be considered.

An update on how to calculate holiday pay

As you will no doubt know, there have been some massive changes surrounding holiday pay throughout 2014/15.

It is no longer a case of simply paying the employee their standard wage for the time they are off.

Now, employers should be looking to pay an employee’s ‘normal remuneration’ whilst they are on holiday.

This can include compulsory and non-guaranteed overtime and commission.

The theory behind this change is to make sure that an employee doesn’t ‘miss out’ financially whilst they are on holiday.

We can see the idea behind it – employees shouldn’t be put off from taking their holiday through fear that they will not earn the same as if they were at work… BUT, equally, employers need to know exactly what they need to include in the calculation!

Considering voluntary overtime

The latest case heard in the Court of Appeal in Northern Ireland, said that voluntary overtime may need to be included when calculating holiday pay.This time it’s the turn of voluntary overtime i.e. overtime that an employer does not have to provide and the employee doesn’t have to work.

The Court of Appeal did not give any guidance about when voluntary overtime should or should not be included in the calculation.

Instead, they said that each case should be looked at on a case by case basis.

This case is going to go back to the Employment Tribunal for them to have another look at it.

For now, it is safe to say do not automatically discard voluntary overtime as it may need introducing in your holiday pay calculation.

If you would like any further advice on calculating holiday pay or any other aspect of employment law and HR, please contact our Employment & HR team on 01332 340 211.