Overtime Payment Arrangements
A number of recent Tribunal decisions have established the principle that employees should not be deterred from taking annual leave by being worse off for being on leave than if they had been in work. This primarily relates to overtime payments not being taken into account when calculating holiday pay, and employees just receiving their basic pay regardless of the level or regularity of overtime undertaken.
Advice from ACAS is that "Workers should usually receive the same pay while they are on annual leave as they normally receive while they are at work" and go on to say that "All types of overtime, including voluntary, must be included when calculating a worker's statutory holiday pay entitlement, apart from overtime that is only worked on a genuinely occasional and infrequent basis."
http://www.acas.org.uk/index.aspx?articleid=4109
The requirement to recognise overtime when calculating holiday pay, however, only applies to the 4 weeks of annual leave required by the EU Working Time Directive. It would be impractical to determine what overtime is regular and therefore should be reflected in holiday pay, in light of the resources required to monitor this, the lack of any legal definition as to what constitutes regular overtime and that this approach may encourage employees to undertake unnecessary overtime to establish a level of regularity.
Therefore, an additional 7.69% is added to overtime payments to accommodate the requirement to reflect overtime in holiday pay calculations for the 4 weeks of annual leave required by the EU Working Time Directive.
It is anticipated that this proactive approach avoids claims for back pay and should be taken in the context of a continuing review of the levels of overtime, including exploring ways in which overtime costs may be reduced.
It is not proposed that standby payments are enhanced, as arrangements to undertake standby are rostered around annual leave. Therefore, employees do not suffer any detriment as a result of taking annual leave.
Should there be subsequent case law which impacts upon this issue then the council will review the measures and potentially implement alternative arrangements.
The arrangements for all overtime worked were implemented from the 1st April 2018. Unison agreed to the proposals and all staff were written to informing them of the changes prior to implementation.