In the case of Flowers v East of England Ambulance Trust, the Employment Appeal Tribunal affirmed the position that, where there is a pattern of working overtime which is “sufficiently regular” to count as part of an employee’s normal remuneration, both non-guaranteed overtime and voluntary overtime should be taken into account when calculating holiday pay under the Working Time Directive.
The Claimants, working in the ambulance service, asserted that their holiday pay entitlements should take into account two categories of overtime:
- Non-guaranteed overtime (otherwise known as shift overrun payments). This arises where, at the end of a shift, an employee is in the middle of completing a task which they must see through to the end, such as treating patients. In such circumstances, the Claimants’ obligation to complete the task continues beyond the end of their shift entitling them to payment.
- Voluntary overtime. The Claimants may be offered overtime but there is no expectation or requirement for them to volunteer.
In addition to this claim being brought under the Working Time Directive / Working Time Regulations, the Claimants brought a contractual claim on the basis that their NHS terms and conditions of service stated that their holiday pay would include “regularly paid supplements, including ... payments for work outside normal hours” and that their holiday pay would be “calculated on the basis of what the individual would have received had he/she been at work”, to be calculated over a three month reference period.
The Employment Appeal Tribunal (EAT) held that, with regards to the Working Time Directive claim, voluntary overtime should be taken into account when calculating holiday pay entitlement so long as the payments made to employees have been sufficiently regular and paid over a sufficient period of time. The EAT rejected the argument that there needed to be an “intrinsic link” between the payment of overtime and the performance of tasks required under the contract.
With regards to the contractual claim, the EAT held that the NHS terms and conditions of service should be interpreted as requiring any overtime pay (which included both non-guaranteed overtime pay and voluntary overtime pay) earned in the three months prior to annual leave being taken to be included in the calculation of holiday pay, regardless of whether the employee was contractually required to work the overtime or if there was any pattern or regularity to it being worked.
This case confirms that for Working Time Directive holiday entitlement (4 weeks per year) both non-guaranteed overtime and voluntary overtime should be included in the calculation of holiday pay if it has been worked over a sufficient period of time for it to be considered as “normal remuneration”. While the question of whether overtime is sufficiently regular over a particular period will still be for the employment tribunal to determine in each case, it is sensible for employers to look back at all overtime worked in a fixed reference period when calculating holiday pay.
Whilst the contractual claim in this case was decided on facts which were particular to the NHS terms and conditions of service, the decision highlights the danger to employers of imprecise contractual wording which could inadvertently widen the range of payments which should be included in the calculation of holiday pay. Employers may wish to review their own contractual holiday pay provisions to ensure that the drafting is unambiguous.