"If a worker regularly undertakes overtime work then that should be taken into account when calculating their holiday pay entitlement."
Employers must take regular overtime into account when calculating employees’ holiday pay or risk being exposed to legal claims, warns employment specialist Kevin Jones.
Kevin, partner at Clarke Willmott LLP, says all workers have the right to a minimum of four weeks paid annual leave a year and receive their normal pay while on holiday.
However, it was revealed this week that bookmakers Betfred had failed to pay staff correctly who had worked overtime ahead of a holiday period.
Instead, it calculated their holiday pay based on their contracted hours. It now faces potential claims from employees who work at its 1,650 betting shops.
“The law is now pretty clear,” said Kevin, head of Clarke Willmott’s national employment and HR team, who advises a number of high-profile employer organisations across the UK.
“If a worker regularly undertakes overtime work then that should be taken into account when calculating their holiday pay entitlement.
“This is the issue Betfred appears to have run into with reports that many of its workers have not been paid correctly despite the employers promise to make good any shortfall.
“For many employees the question of how much money they should receive while on holiday is pretty straight forward – if they receive a fixed salary, they should continue to receive that same salaried pay when they are on leave.
“However, for people who often work overtime, payments should be included when they are on holiday even if they are non-contractual and voluntary.”
Under the Working Time Regulations (WTR) all workers are entitled to a minimum of four weeks paid annual leave a year. And the recent Court of Appeal case (Flowers vs the East of England Ambulance Service) ruled that voluntary overtime undertaken on a regular basis should be included.
“Unfortunately, the court failed to give any real guidance as to how regular the overtime needed to be before it had to be included,” added Kevin.
“The best likely interpretation would be to err on the side of caution and if in reality it is often the case that the worker undertakes overtime, then it should be included.
“Employers should not ignore the issue and must look at each situation on a case by case basis, and apply a consistent approach to all staff who work voluntary overtime.
“They will clearly be taking a risk to do otherwise as it is clear that the courts are looking to find in favour of workers in this situation.”
Clarke Willmott LLP is a national law firm with seven offices across the country.