Holiday pay and overtime — implications of Freightliner decision for pension schemes

In Neal v Freightliner Ltd, the Employment Tribunal (ET) looked at the payment of overtime during a worker’s statutory holiday leave. Previously only guaranteed contractual overtime has been included in holiday pay calculations. However, the ET decided that non-guaranteed overtime (whether compulsory or voluntary) should also be included.

Under the Working Time Directive (WTD), a worker is entitled to four weeks of paid annual leave. The Working Time Regulations 1998 (WTR) implement the WTD in the UK. The British Airways plc v Williams case established that a worker must be no worse off financially during annual leave than if he/she had continued working. So, under EU law, workers are entitled to receive their ‘normal remuneration’ when taking statutory holiday leave.

The traditional view is that guaranteed contractual overtime (obligatory on the part of the employer and the worker) counts towards ‘normal remuneration’. Non-guaranteed overtime does not count for workers with normal contractual hours. Statutory holiday pay has therefore traditionally been calculated by reference to contractual hours only…

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