Holiday Pay - Employers working out 'Normal pay'

There have been a number of cases recently where the courts have determined when holiday pay is payable and what the worker should be paid whilst on leave. It was made clear that the worker was entitled to be paid “normal pay” when on holiday which included commission and guaranteed overtime. However, there was doubt whether voluntary overtime was covered by the definition of “normal pay” and whether this should be included in holiday pay.

In a recent case, the Employment Appeal Tribunal (EAT) had to decide whether pay for voluntary overtime was “normal remuneration” and should be included when calculating holiday pay.

The employees in this case were electricians, plumbers and roofers who acted as Quick Response Operatives working for a local authority. In addition to their normal daily duties they also worked on an entirely voluntary basis, overtime which was paid as an additional standby/callout allowances.

The employer asserted that voluntary overtime payments were not 'normal remuneration' because they were not linked to the performance of the tasks the employees were required to undertake under their contracts.

The EAT rejected this argument and said to exclude such payments from holiday pay would result in a financial disadvantage to the workers which in turn might deter them from taking annual leave. The EAT also said there was a clear link between the overtime payments and the performance of their duties, because when they were working overtime the employees were performing the same tasks as they performed under their contracts.

So from this decision it is clear that 'normal pay' is the pay that is normally received by the employee/worker. The question the employer should ask when calculating holiday pay is What would the worker have been paid if they had not taken holiday?