Overtime was considered in calculating Statutory Holiday Pay

An Employment Tribunal has recently held that when calculating holiday pay, an Employer should have considered overtime payments as part of the calculation.

An Employment Tribunal has recently held that when calculating holiday pay, an Employer should have considered overtime payments as part of the calculation.

In Neal v Freightliner, the Employer looked at the definition of “week’s pay”. A “week’s pay” for these purposes is used to calculate an employee’s statutory annual leave at a rate of one week’s pay for each week of leave.

A “week’s pay” will not be obvious where someone works irregular hours, and this will be calculated as an average of the sums earned over the previous 12 week period. This would only include overtime payments where they were fixed by the contract, and where the Employee had no choice under the contract but to work the overtime hours. In essence, wherever the overtime hours were ‘guaranteed’.

Under EU law, workers who take statutory holidays are paid holiday pay based on their “normal remuneration”, which includes salary plus payments “intrinsically linked to the performance of the tasks” under their contract.

In the case itself, Mr Neal’s contract stated that he "may be required to work overtime when necessary". As he often worked hours over and above his contractual entitlement of 7 hours a day, he argued that his Employer required him to work these hours and that he had no choice regarding whether he worked them or not. The Employer argued they never actually required him to work the long hours that he did.

After Mr Neal’s statutory holiday pay was calculated on a salary worked out over a 35-hour week, the Employment Tribunal found that as the Employee was performing overtime tasks as part of his contract, his overtime pay was clearly linked to the tasks he was performing, and therefore should have been considered as part of the holiday pay calculation.