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A recent Court of Appeal decision regarding the calculation of average holiday pay has provided further clarification (if that’s the right word!) on how holiday pay should be calculated. In the case of East of England Ambulance Trust v Flowers the Court addressed the issue of ‘voluntary overtime’ and how that should be treated for holiday pay purposes. The finding was that if voluntary overtime is "sufficiently regular and settled" it should be included within the calculation for average holiday pay, but if it is "exceptional" then it should not be considered. There is no clear further definition of what should be considered in the calculation of holiday beyond the descriptions given above. As a guide though, an employee who agrees to do overtime each month when the accounts are prepared would have that overtime taken into account, whereas an employee who worked overtime to help resolves the consequences of a flood would find that didn’t contribute to the calculation of holiday pay.

 

I suspect that most employers will be pragmatic about this and include all overtime in the calculation of holiday pay, simply to avoid the admin chore of coding overtime for payroll purposes as qualifying or non-qualifying.

 

If you would like any further information on this please don’t hesitate to contact me.

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