Voluntary overtime and holiday pay calculations

In the recent case of White and others v Dudley metropolitan borough council, it was ruled that if voluntary overtime looks regular it most probably needs to be included in your holiday pay calculations. This is a natural progression of the guiding principle we have been following that a worker should not be worse off financially simply because they have taken or wish to take a period of annual leave.

This latest case reinforces our view that if an employee regularly works voluntary overtime over and above their normal contracted hours, pay for such hours may become normal pay and therefore should be included in holiday pay calculations. These hours may be include overtime, standby or call out payments according to this case.

In the ruling above the term ‘sufficiently regular’ is used as a definition of what ‘normal’ might equal in relation to pay. The barrister representing the claimants suggests normal might be once per quarter.  

In this case, the judge placed importance on the length of time the extra payments have been in place. Whilst this case does not provide us with exact clarity it defines ‘normal’ a little more for us. 

This extra level of detail will be helpful for employers when they are deciding whether the non contractual hours their employees are working should or should not be included in their holiday pay calculations.

Next steps

It would be sensible to assess the potential impact on your company based on this ruling, assessing the utilisation of voluntary overtime, standby and call-out payments.

Please get in touch with Steve Sweetlove or your usual RSM contact for more information.