UK: Holiday pay - Northern Irish ruling that employers may need to include voluntary overtime pay in calculation

In Patterson v Castlereagh BC the Northern Irish Court of Appeal has given its view that, in principle, voluntary overtime pay may need to be included in the calculation of holiday pay for the 4 weeks' EU statutory holiday. This builds on the EAT ruling in Bear Scotland v Fulton last year that “non-guaranteed” compulsory overtime pay (“non-guaranteed” in that the employer is not obliged to offer overtime, but it is compulsory for the worker to perform it if offered) should be taken into account. The point on extending this to completely voluntary overtime was conceded by the parties so detailed argument was not heard, but it does reflect a commonly held view. The ruling is only binding in Northern Ireland, but will be persuasive elsewhere in Britain in the absence of other case law on this point.

The Court ruled that it will be a question of fact in each case as to whether or not the voluntary overtime was "normally carried out by the worker and carried with it the appropriately permanent feature of the remuneration to trigger its inclusion in the calculation". No guidance was offered as to what a sufficiently consistent or regular pattern of overtime would be, nor as to what the "sufficiently representative reference period" for calculating pay should be.

Many employers may legitimately decide to maintain their 'wait and see' approach, but some may want to consider responses such as restricting levels of regular overtime where appropriate, putting contingencies in place, or voluntarily adjusting holiday pay policy, depending on the level of risk and nature of arrangements in their workforce.

It is also worth noting that the two year back stop on holiday pay claims has now come into force for claims issued on or after 1 July 2015 – see here for further detail.