Councils manage their staff's working hours differently, whether it's the Clerk handling out-of-hours meetings or seasonal grounds staff on variable contracts. Compliance with overtime and holiday pay rules is a major legal risk area, especially after recent changes in UK law (for leave years starting on or after April 1, 2024).
The days of just paying basic salary for overtime are over. Here is your essential guide to managing additional hours and the new rules around holiday pay.
The Power of Timesheets
Your Council needs absolute clarity on every hour worked. The timesheet is your key piece of legal evidence.
Timesheets are non-negotiable. They must precisely record the start, finish, and break times, forming the basis for accurate pay calculations.
All overtime or TOIL must be authorised in advance (e.g. by the Chairman for the Clerk, or by the Clerk for other staff) and signed off. Overtime worked without pre-approval should not be paid and must be addressed immediately via policy.
Overtime and Irregular Overtime: What to Pay
Unless your contract states otherwise (e.g. paying time-and-a-half), overtime is usually paid at the normal hourly rate or compensated with TOIL.
Your contract and policy must clearly define overtime as any hours worked above the employee’s contractual hours.
This is where the risk lies. If an employee (Clerk, maintenance staff) regularly works additional hours (e.g. attending evening meetings, seasonal tasks), even if voluntary, that overtime becomes part of their 'normal remuneration' and must be factored into holiday pay. If it's genuinely occasional and infrequent, it does not need to be included.
Holiday Pay on Overtime
Following case law, holiday pay must reflect "normal pay" to ensure staff are not financially deterred from taking leave.
For the first four weeks of a worker's annual leave entitlement, the holiday pay must include amounts for regularly paid overtime (whether guaranteed, non-guaranteed, or even voluntary if regular).
The 52-Week Average
For most Parish Council staff, especially those working fixed hours (like the Clerk) but receiving irregular overtime, the only legally safe way to calculate the correct holiday pay rate is the 52-week reference period:
Look back at the last 52 weeks in which the employee was paid.
Calculate Average Pay: Work out the employee’s average weekly pay over those 52 paid weeks (including all regular overtime and allowances).
Pay the Average: When the employee takes a week of holiday, they must be paid at this average weekly rate, ensuring the overtime is compensated.
'Rolled-Up Holiday Pay' (The 12.07% Rule)
For Irregular Hours Workers (e.g. casual staff, true zero-hours contracts) and Part-Year Workers (e.g. staff only working school terms), the law changed for leave years starting on or after April 1, 2024.
Councils can now legally use "Rolled-Up Holiday Pay" for these specific categories of workers.
This involves paying a mandatory uplift of 12.07% of the worker's total pay (including their irregular overtime pay) added to their regular wages in each pay period.
This 12.07% is the value of 5.6 weeks' holiday as a percentage of the 46.4 working weeks in a year.
This money must be shown as a separate holiday pay component on the payslip. Crucially, the Council must still ensure and encourage the worker to take the physical time off, even though they've already been paid for it.
While the 12.07% method is simpler, most Parish Councils should continue using the 52-week average and paying holiday when leave is taken, as the rolled-up pay method adds administrative complexity and carries a risk of non-compliance if the worker is misclassified or fails to take their leave.
Unpaid overtime
If your employee works unpaid overtime, their hours across the week (including these unpaid hours) must all equate to at least minimum wage. If the hours work averages outside of NMW, this is illegal. For example, an employee who works 5 hours per week at £14 per hour would only need to work 31 minutes unpaid to fall below the NMW threshold.