How to Calculate Holiday Pay on Overtime

Case law decided through our judicial system and The European Court of Justice has determined how to calculate holiday pay and has rumbled on for a number of years.

Three categories of overtime have been established:

  • Guaranteed (compulsory) overtime, where even if the employee is not called on to work it; the employer is liable to pay them for it.
  • Voluntary overtime, where an employee cannot be required to work it and the employer does not have to provide it.
  • A “halfway house” (sometimes called “non-guaranteed” overtime), where the employer does not have to provide overtime (or pay in lieu), but it is compulsory for the employee if required.

It has been well established that for both guaranteed and non-guaranteed overtime that these should be included when calculating holiday pay.

Last month the Court of Appeal ruled that where voluntary overtime has been paid over a sufficient period for it to be considered regular or on a recurring basis that this should also be reflected in holiday pay calculations. If you are unsure if this applies to your workforce get in touch and we can help.

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