Employment Tribunal decides that overtime, shift premiums and on call payments must be included in holiday pay.
In August it was widely reported in the press that the employee-owned John Lewis Partnership had admitted it had miscalculated holiday pay for its partners for at least seven years. John Lewis said that it had made an error by basing its holiday payments only on the contracted weekly hours for staff; and not including the premiums its staff earned for working on Sundays or Bank Holidays. The partnership paid out £40m to compensate 69,000 workers for its mistake.
Back in 2011, the European Court of Justice (ECJ) decided that the Working Time Regulations 1998 should be interpreted in light of the European Directive they were designed to implement. That meant the ECJ recommended that holiday pay should be calculated with reference, not just to basic pay, but also to any other pay which was ‘intrinsically linked’ to the individual’s work, such as overtime, shift premiums and any on-call payments given to staff. This principle has recently been tested in a first instance employment tribunal decision in the UK.
The employee was obliged to work a 35 hour week and overtime when necessary. He regularly worked between 9 and 12 hours a day and received enhanced pay for his overtime above his contracted 7 hours a day shift pattern. The employment tribunal held that the overtime worked by the employee over and above his contractual hours was intrinsically linked to his role and therefore he was entitled to have that overtime taken into account when calculating his holiday pay. The tribunal said that it was irrelevant whether that overtime was voluntary, or obligatory and noted that, in practice, employers are able to control the levels of overtime offered and accepted by their staff.