Overtime

There have been a raft of cases in recent years regarding holiday pay and specifically whether and to what extent overtime pay should be included in calculating the amount of holiday pay a worker is entitled to for the four weeks of annual leave which are required to be given to UK workers under European Law. Holiday pay should be paid at ‘normal’ remuneration to ensure that workers are not discouraged or penalised for taking annual leave.

The recent EAT case of Flowers v East of England Ambulance Trust considered again whether voluntary overtime should be included in the calculation of holiday pay.

This particular case concerned members of the ambulance crews of East of England Ambulance Trust who had clauses in their employment contracts dealing with ‘non-guaranteed’ overtime (which was compulsory) and ‘voluntary’ overtime (which was entirely voluntary).  The employees worked both types of overtime but on an irregular basis.

In their claim to the Employment Tribunal, the ambulance crews argued that their voluntary overtime should count towards their ‘normal’ remuneration. On appeal to the EAT, the case of Dudley Metropolitan Borough Council v Willetts was followed and it was held that voluntary overtime was part of normal remuneration if it was paid over a “sufficient period of time“. What amounts to a sufficient period of time will be a matter of fact for the Employment Tribunal to consider on a case by case basis.

ACAS has released some guidance on the issue of overtime and set out that there are three different types of overtime; –

  • Voluntary overtime – where the employer has no obligation to offer overtime and the worker has no obligation to work such overtime if it is offered.
  • Guaranteed overtime – where the employer is contractually obliged to offer overtime and the worker is obliged to perform it.
  • Non-guaranteed overtime – where the employer is not obliged to offer overtime but when it is offered, the worker must accept and work it.

It is recommended that an employer wishing to rely on guaranteed or non-guaranteed overtime should clearly set out in the terms and conditions of employment that acceptance of such overtime is compulsory.

There is no automatic right to receive extra remuneration for overtime, as long as the worker does not receive less than the National Minimum Wage for hours actually worked; for example, an employer may decide to offer time off in lieu as an alternative to extra pay.  Again, the terms and conditions should be clear about what, if anything, the worker will receive for working overtime.

The guidance concludes that, in general, all overtime pay received should be included in calculating a worker’s ‘normal’ remuneration for the purposes of holiday pay unless that overtime is worked on a genuinely occasional and infrequent basis.