Undercalculating Overtime

In November 2014, the Employment Appeal Tribunal (EAT) handed down its decision in the case of Bear Scotland Ltd v Fulton, which stated that, when calculating holiday pay, non-guaranteed overtime should be included in that calculation (read our report here). This potentially left the door open for employers to argue that this did not include purely voluntary overtime, i.e. overtime which an employer may offer to an employee but which they are free to turn down, since this was not specifically referred to within the EAT’s judgment.

In Patterson v Castlereagh Borough Council, a Northern Ireland Employment Tribunal decided that the voluntary overtime carried out by Mr Patterson did not form part of his normal remuneration and should not, therefore, be included in the calculation of his holiday pay. Mr Patterson appealed the decision.

When the case got before the Court of Appeal in Northern Ireland (NICA), both parties were represented by QCs who conceded that the original Tribunal was wrong to conclude that voluntary overtime should not be included in the holiday pay calculation. In the circumstances, the NICA’s hands were tied and it decided that voluntary overtime should, in these circumstances, have been included. However, the NICA did go on to say that the decision had been reached without full argument on the issue and should, therefore, be read in light of this and with that degree of caution attached to it.

This decision is not binding on English, Scottish or Welsh courts. However, it may be persuasive, i.e. it could be used in other cases to support an argument that voluntary overtime should be included in holiday pay calculations.

We have previously provided some detailed guidance on this issue here. This case does support the view that overtime which is regular, whether voluntary or not, should be included in your calculations.

Director of Legal Services

James Tamm

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