In Dudley Metropolitan Council v Willetts and Others, an ET upheld two claims that payments received for working overtime on an entirely voluntary basis should be treated as “normal remuneration” and therefore should be included in the calculation of statutory holiday pay. The ET acknowledged that in doing it was sailing into “uncharted waters”, but, given the evidence:

• Mr Woolvin works regular overtime which borders on the non-guaranteed as it is expected of him under his job description and as such falls within normal pay, i.e. it is not unusual or rare, but regular.
• Mr Cree works regular Saturdays and is paid overtime. He sees it as an extension to his working week and he is normally paid for it. It therefore falls within normal pay.

The Council appealed. It argued that in determining what should count as “normal remuneration” the ECJ had ruled that there must be an essential link between the payment and the performance of tasks the worker is required to carry out under his contract of employment. Voluntary overtime is not performed under the contract of employment, but by reference to a separate agreement between the parties.

The EAT dismissed the appeal. EU law requires that remuneration for annual leave must correspond to the normal remuneration received by the worker. The overarching principle is that the purpose of this requirement is to ensure that workers benefit from remuneration comparable to that paid in respect of periods of work; or to put it another way, do not suffer any financial disadvantage as a result of taking annual leave.

The exclusion of payments for voluntary work normally undertaken would amount to an excessively narrow interpretation of normal remuneration that gives rise to the risk of fragmenting of pay into different components to minimise levels of holiday pay. It would result in a risk of workers suffering a financial disadvantage that might deter them from exercising their rights. Furthermore, it would carry the risk of employers setting artificially low levels of basic contracted hours and categorising the remaining working time as “voluntary overtime” which does not have to be accounted for in respect of paid annual leave.

Applying EU law, an ET has to determine whether the pattern of work, though voluntary, extends for a sufficient period of time on a regular and/or recurring basis to justify the description “normal”, and, whether it is sufficiently regular so that payments made in respect of it to amount to normal remuneration. On the facts of this case, the ET did not err in finding that payment for overtime normally worked on a voluntary basis was part of normal remuneration and should be used in the calculation of statutory holiday pay.

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