The Employment Appeal Tribunal has held that non-guaranteed and voluntary overtime pay earned in the previous three months should be taken into account when calculating NHS holiday pay under staffs’ contractual terms and the Working Time Directive.

The employees, in this case, were sometimes contractually obliged to work extra time at the end of their shift to finish a task. They were paid for these shift overruns, referred to as ‘non-guaranteed overtime’. On occasion they worked voluntary overtime.

They brought unlawful deduction from wages claims claiming that the calculation of their holiday pay should take account of both their non-guaranteed overtime and their voluntary overtime payments.

The tribunal held that they were entitled to have their non-guaranteed overtime taken into account when calculating holiday pay, but not their voluntary overtime.  The tribunal considered that the non-guaranteed overtime was paid because they were contractually required to complete the matter they were dealing with before they finished their shift. Whereas the voluntary overtime was non-contractual and there was no regular pattern to it.

Allowing a subsequent appeal, the Employment Appeal Tribunal rejected the employer’s argument that whether a payment constitutes ‘normal remuneration’ will depend on an intrinsic link between the payment and the performance of tasks required under the contract of employment. This was because:

  • That argument fails to engage with the overarching principle identified that normal remuneration must be maintained during the period of annual leave.
  • Any argument that an employee’s agreement to carry out specified hours of voluntary overtime for reward does not give rise to any contractual obligation would be untenable.

 

It saw no good reason to construe the references to ‘pay’ in a way which confined it to basic pay and excluded overtime.

It also said that there was no justification for the distinction drawn by the tribunal between overtime which was or was not required by their contractual terms.

Case reference: Flowers and others v East of England Ambulance Trust