This case is yet another decision concerning holiday pay and whether it should be calculated by reference to (i) non-guaranteed overtime; or (ii) voluntary overtime.

The EAT concluded that both as a matter of contract, under the NHS Terms and Conditions of Service, and under the Working Time Directive that voluntary overtime and non-guaranteed overtime should be taken into account when calculating holiday pay.

The EAT specifically approved the decision of Dudley Metropolitan Borough Council v Willetts [2018] ICR 31 in which it was held that the overarching principle is that ‘normal’ remuneration must be maintained in respect of the period of annual leave.

The EAT refused to accept the argument that because over-time was considered ‘voluntary’ that it was not linked to the contract. It therefore rejected the proposition that voluntary over-time necessarily falls outside the annual leave calculation.

Further, the EAT endorsed the view that for a payment to count as ‘normal’ remuneration, it must have been paid over a sufficient period of time. It noted that one decisive test for determining whether a component of pay is part of ‘normal’ remuneration is where there is an ‘intrinsic link’ between the payment and the performance of tasks that the worker is required to carry out his or her contract of employment. The appeal was allowed.

Practical Lessons

The EAT made clear that there is no basis for distinguishing between non-guaranteed and voluntary overtime. However, the key issue for employers may turn out to be whether overtime payments can be considered ‘normal remuneration’.

One claimant here conceded that ‘it could not be said that for everyone voluntary overtime was something they normally did’. This comment reflects that reality that that what amounts to ‘normal remuneration’ will be a matter of fact and degree and could realistically lead to the conclusion that for some it is and for others it is not.

Employers should be prepared to explain why overtime payments do not amount to ‘normal remuneration’ for individual employees. At the time of writing, we believe this case will be subject to appeal.
https://assets.publishing.service.gov.uk/media/5b3de422ed915d39d27ad51c/Mr_N_Flowers_and_Others_v_East_of_England_Ambulance_Trust_UKEAT_0235_17_JOJ.pdf