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Holiday pay (again)


Some employees at Dudley Metropolitan Borough Council (“the Council”) were contracted to work 37 hours per week and were also able to volunteer to perform overtime. The employees could also put their name on the ‘on-call rota’ which meant that they would be paid a standby allowance and would also receive call-out payments (if they were called to do work). However, there was no obligation on the employees to carry out voluntary overtime or put their name on the ‘on-call rota’ and the Council had no right to force the employees to do so.

The Council did not include the voluntary overtime and on-call payments that the employees received when calculating holiday pay and a group of 56 employees from the Council brought claims for unlawful deduction of wages. The employees claimed that the payments made up part of their “normal remuneration” and therefore should be included in the holiday pay calculations.

The Law

Recent case law has established that workers are entitled to receive “normal remuneration” when taking holiday entitlement under the Working Time Directive (i.e. 20 days per year for a full-time employee). The overarching principle is that holiday pay should reflect “normal remuneration” so as not to deter workers from taking annual leave where they may be financially disadvantaged otherwise. However, it is not always clear what “normal remuneration” is for those workers whose pay is made up of variable elements.


The Employment Tribunal decided that the payments were intrinsically linked to the performance of the employees’ duties and that they performed the duties with sufficient regularity for the payments to be considered “normal remuneration”. The Council appealed.

The Employment Appeal Tribunal (“EAT”) dismissed the appeal, confirming that payments for voluntary overtime, standby payments and call-outs must be included when calculating “normal remuneration” when the payments are received with sufficient regularity. The EAT held that to count as “normal” the payments must have been paid over a sufficient period of time on a regular or recurring basis which is a question of fact. In this case, voluntary overtime carried out one in every four to five weeks was sufficiently regular to be included as “normal remuneration”.


Although not a surprising decision as there have been several employment tribunal cases which have made the same decision, this case gives clarity as it is a binding decision of the EAT. Employers who have not already been including voluntary overtime payments in holiday pay calculations should now look to do so where they could be considered sufficiently regular, or risk facing claims for unlawful deductions of wages.

If you would like to speak to us about holiday pay, please feel free to email us  or contact us on 0191 282 2880 for a no obligation chat.


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