Northern Ireland case considers voluntary overtime in holiday pay calculations

26 June 2015

With thanks to Pinsent Masons for their summary:

The facts relate to the inclusion of voluntary overtime (being any overtime that the employer is not obliged to offer and the employee is not obliged to accept) in the calculation of holiday pay. The appeal was to consider the Industrial Tribunal’s original decision that voluntary overtime should not be included in holiday pay calculations. At the hearing, counsel for the employer conceded that the consideration of voluntary overtime may not have been properly considered at the Tribunal hearing. Further, it was conceded that there is ‘nothing in principle to stop voluntary overtime being included within the calculation of holiday pay’. It was argued that this should only be where voluntary overtime constitutes "normal remuneration" as set down in the earlier decisions such as Bear Scotland. This would require the detailed facts (including the regularity of overtime performed) to be considered.

Although judgment has been reserved, it now seems likely that the Northern Ireland Court of Appeal will confirm that voluntary overtime ought to be included in the calculation of holiday pay, provided that the voluntary overtime meets the requirements of "normal remuneration." It is probable that this case will then be remitted back to the Industrial Tribunal for determination on its particular facts.

The impact for employers?

For now, employers (both in Northern Ireland and beyond) should be conscious that voluntary overtime is under consideration and keep a watching brief on the outcome of this case. The reports of concessions by the employer’s representative in the hearing have surprised many experts. Previously, the distinction between voluntary and compulsory overtime had been relatively clear, even though the issue of voluntary overtime was outstanding.

If the case is remitted to the industrial tribunal for an examination of the facts, there will be further delay in receiving clarification. It is now thought to be more likely that voluntary overtime will ultimately be held to be part of the holiday pay calculation. As a result, provisional audits of such arrangements within businesses are advisable. The focus of these audits should be the ‘forward looking’ position rather than a heavy focus on the risk of back pay claims. This is because the likelihood of significant back pay claims has been lessened by the findings in Bear Scotland by the operation of the three month time limit.

Although decisions of the Court of Appeal in Northern Ireland are not binding in Great Britain, the outcome of this appeal is likely to carry considerable weight as a persuasive authority in the short term. In the longer term, if the case proceeds to a further appeal to the Supreme Court, it may yet bind the courts and tribunals in Great Britain directly.

The key outstanding question was whether voluntary overtime should be included in the calculation along with the other allowances and with compulsory overtime. Hence the attention focused on the Northern Ireland Court of Appeal.