Article

Overtime payments and pay during annual leave

Read the agreement on how employers should calculate overtime pay whilst on annual leave.
Agenda for change

12 March 2021

The NHS Staff Council has agreed a framework to enable NHS employers in England to resolve issues in relation to the correct calculation of pay while on annual leave, in respect of regularly worked overtime and additional standard hours (AST), under the NHS terms and conditions of service (Agenda for Change).

Section 13.9 of the NHS terms and conditions of service states that:

'Pay during annual leave will include regularly paid supplements, including any recruitment and retention premia, payments for work outside normal hours and high cost area supplements. Pay is calculated on the basis of what the individual would have received had he/she been at work.'

The national discussions that have taken place now clarify how NHS employers should interpret section 13.9 of the NHS terms and conditions of service. It is now accepted that employers should include regularly worked overtime and additional standard hours in the calculation of pay when staff are on annual leave.

This agreement is for England only. An agreement has already been reached in Scotland. Employers in Cymru Wales and Northern Ireland have indicated they will enter discussions with trade unions to resolve this issue.

Download the framework agreement.

Corrective payments

Corrective payments will be made in respect of the period covering the financial years 2019/2020 and 2020/2021.

The corrective payments will be based on overtime earned in the financial years 2019/2020 and 2020/2021. To be eligible for a corrective payment in either or both financial years a member of staff will need to meet the eligibility criteria set out in the framework agreement.

More details on the eligibility criteria and how the corrective payment is calculated can be found in the below FAQs. 

Existing claimants

NHS employers and trade unions have agreed to work collectively (both nationally and locally) to resolve outstanding legal claims.

The existing legal claims lodged in the Employment Tribunal or the County or High Court, will be resolved through local settlement discussions between the relevant employer and the claimant along with their legal adviser.

Future application

NHS Employers is working on guidance for the future application of annual leave pay in respect of regularly worked overtime under the NHS terms and conditions of service (Agenda for Change). Please continue to check this section for further information.

FAQs

Below you can find FAQs on the following areas:

  • Payment information
  • Corrective payments
  • Eligibility
  • Implementation
  • Existing claimants.
  • 1. Will this be nationally funded?

    Yes (according to central estimates, which will be updated at the point that actual payments processed).

    2. How will employers receive funding for this?

    Funding arrangements will be confirmed by NHS England and NHS Improvement or DHSC, through usual financial reporting channels.

    3. What payment will a member of staff receive?

    Staff who meet the eligibility criteria in the framework agreement will receive a corrective payment of 16 per cent (the multiplier) of the total pay for overtime, and additional standard time, received in the financial year 2019-2020 (1 April 2019 to 31 March 2020) and/or 2020-2021 (1 April 2020 to 31 March 2021). These payments are non-pensionable and will be subject to employer deductions for tax and NI.

    4. Why use a multiplier?

    Data on the details of actual overtime and additional standard time worked may not have been retained or may be incomplete. However, records of the payments made for overtime, and additional standard time, are kept.

    A percentage multiplier is the most pragmatic means of calculating a corrective payment based on the payments already made for the overtime and additional standard time worked.

    5. Why is the multiplier set at 16 per cent?

    The 16 per cent multiplier has been agreed to reflect a combination of the period of time that overtime was not included in annual leave pay calculations, the number of eligible staff, the overall estimated cost of the framework agreement and annual leave entitlement set out in the NHS terms and conditions handbook.

    This multiplier is intended to appropriately compensate eligible staff. However, it is only being used for the purposes of the corrective payment and has no wider application.

    6. What corrective payment will part time staff receive?

    The same multiplier and eligibility criteria will apply to eligible part time staff for any payments received for work above their contracted hours. This could be additional standard time and/or overtime.

    7. Will this payment be pensionable?

    No. This payment is not pensionable.

    8. Will payments be taxed?

    Yes. These payments will be subject to tax deductions and national insurance deductions at source.

    9. Will this payment affect state benefits received by staff?

    State benefits which depend on national insurance contributions (NICs) may be affected by a corrective payment. Benefits which do not depend on NICs will not be affected. Members of staff in receipt of state benefits dependent on NICs should contact their benefit provider. More information on State benefits can be found on the Gov.UK website.

    10. An NHS employer has a local agreement in place and has been making some payments already for non-guaranteed overtime on statutory annual leave. Will staff still get a payment?

    These agreements are sometimes referred to as Bear Scotland payments, and include non-guaranteed overtime based on 20 days statutory annual leave.

    NHS employers will take into account any previous payments of this type made to employees when calculating any corrective payments.

    This framework agreement considers all overtime (voluntary and non-voluntary) and covers all contractual annual leave.

    11. Does this override any local agreements to resolve historic issues related to the calculation of pay on annual leave and overtime payments outside the timescales set out above?

    No. This framework agreement enables NHS employers to access national funding to correct overtime pay when employees are on annual leave with national trade union support.

    Where different commitments have been made locally, before 1 April 2019, NHS employers will need to work with trade unions to decide how the commitment will be delivered.

    12. What about the periods before 1 April 2019? Are members of staff entitled to corrective payments for these?

    The NHS Staff Council has agreed that this corrective payment is the best way to resolve disputes on the treatment of overtime and additional standard time within annual leave pay.

    No further corrective payments will be made.

    What is included in the payment?

    1. Will cost of living increases to pay be considered in the calculation of corrective payments?

    Yes. Corrective payments are based on the actual overtime payments staff received in the financial years 2019-20 and 2020-21 so will already reflect cost of living increases.

    2. Does the corrective payment take account of the extra hours worked during the pandemic?

    Yes. The calculation of corrective payments will include all overtime and additional hours worked in the financial years 2019-2020 (1 April 2019 to 31 March 2020) and/or 2020-2021 (1 April 2020 to 31 March 2021) where the criteria in the framework agreement is met.

    3. Will overtime pay received by part-time staff who have worked more than 37.5 hours in a week during the pandemic be included in their corrective payment?

    Yes, providing they meet the eligibility criteria, all payments for overtime and additional standard time will be included in the calculation of the corrective period in line with this framework.

    4. What forms of additional activity are included in this agreement?

    The Electronic Staff Record (ESR) will work with NHS employers to provide guidance on the types of payment that should be included within the descriptions of overtime in payroll systems.

    5. Are hours worked on a trust bank included in the Framework Agreement?

    No. The calculations will be based on payment for overtime and additional standard time paid over the last two financial years (1 April 2019 to 31 March 2020 and/or 1 April 2020 to 31 March 2021) for work done under the substantive contract.

    6. Is unsocial hours pay included in this framework agreement?

    No. This framework agreement includes all pay for regularly worked overtime, which is time above the individuals’ contractual hours, including time above standard FTE (full-time equivalent) for the grade and additional standard time for part time staff.

    7. What about TOIL?

    Time off in lieu (TOIL) is taken instead of a payment for overtime. This means staff are able to take time away from work equivalent to the extra hours worked. However, where overtime is not taken off in lieu within three months, and is paid as overtime in line with section 3 of the NHS terms and conditions of service handbook, this will qualify as overtime.

  • 1. Why are NHS employers making corrective payments?

    The NHS terms and conditions of service handbook states that when you take annual leave you should be paid as if you are at work. Following a recent Court of Appeal decision, NHS employers have agreed that the calculation of pay during annual leave should include regularly worked overtime.

    2. Why is this happening now?

    The NHS Staff Council has agreed a framework to help NHS employers make corrective payments to eligible employees for the period between 1 April 2019 and 31 March 2021.

    3. Will the NHS Terms and Conditions of Service (AfC) Handbook need to change?

    No. The NHS Terms and Conditions of Service (AfC) Handbook will not need to change. National discussions have taken place to clarify how NHS employers should interpret section 13.9 of the handbook. NHS employers and trade unions have agreed a framework for employers to assess both eligibility and the value of any corrective payments up to 31 March 2021.

    4. What pay elements are covered by the framework agreement?

    All pay for regularly worked overtime, which is time above the individual's contractual hours, including time above standard FTE (full-time equivalent) for the grade and additional standard time for part-time staff.

    5. What counts as overtime?

    Depending on local policy and practice, overtime, or additional standard time, is any paid time above your contractual hours, normally worked either as time after your normal finish time (for example a shift overrun where you had to continue working) or volunteering for additional shifts agreed in advance as overtime.

    Working additional hours on an NHS bank does not qualify as overtime.

    6. What is the corrective pay period?

    The framework agreement provides for corrective payments covering the financial years 2019-2020 and 2020-2021 only. An eligible employee may receive a corrective payment for one or both of the financial years, as outlined below under the eligibility FAQ section.

    7. Why have financial years been used?

    The corrective payments cover pay for overtime during the two financial years of 2019-20 and 2020-21. This time period has been selected because:

    • It enables corrective payments to be implemented quickly from a data and payroll processing perspective.
    • It provides a corrective payment for the two-year period prior to make sure overtime is included in the calculation of holiday pay from 1 April 2021.

    8. What information should individuals get from their NHS employer about the corrective payments?

    Staff will be provided with personal information about how their corrective payment has been calculated. NHS employers will also provide information to staff about how questions on the calculations will be answered generally.

    In the hopefully rare circumstances, where an employee does not believe that their overtime payments and any corrective payment has been correctly calculated, we would encourage conversations with line managers to address this issue in the first instance. NHS employers will agree an appeals process with trade unions under local partnership working arrangements to resolve any issues.

    9. Are Scotland, Wales and Northern Ireland included in the agreement?

    This agreement covers England only. An agreement has already been reached in Scotland. Employers in Cymru Wales and Northern Ireland have indicated they will enter discussions with trade unions to resolve this issue.

  • 1. Who is eligible to receive a corrective payment?

    To be eligible for a payment staff must:

    • be employed by an NHS employer (as listed in Annex 1 of the handbook) on 31 March 2021; and
    • have received payments in respect of overtime in a minimum of four months out of the 12 months in the financial year 2019-2020 (1 April 2019 to 31 March 2020) and/or 2020-2021 (1 April 2020 to 31 March 2021).

    2. An NHS employer has been paying some individuals overtime during statutory annual leave. How will this affect the individual’s payment?

    NHS employers will adjust any corrective payments to take account of pay during annual leave that has already been made for overtime. For example, in the ambulance sector, payments made for compulsory shift over-runs during statutory annual leave.
     

    3. Why use an eligibility criteria?

    Overtime and or additional standard time should have been worked with sufficient regularity for it to count towards holiday pay.

    For the purposes of the corrective payments framework agreement  only, NHS employers and the trade unions have agreed that four months in each financial year is an appropriate threshold for establishing regularity of overtime.
     

    4. How will staff know that they are eligible?

    Staff will be informed by their NHS employer if they are eligible. Employers will be planning to pay the corrective payment before the end of September 2021, and staff should wait to be contacted.

    5. Will part-time staff be entitled to a corrective payment?

    Yes, eligible part time staff who have worked more than their contracted hours and have received additional pay, which has not been included in their annual leave will be entitled to a corrective payment.

    They will be subject to the same eligibility criteria which applies to the pay for overtime above standard hours worked by full-time staff.

    6. Will staff still be eligible for a corrective payment if they have worked irregular shift patterns?

    Yes, if a member of staff meets the eligibility criteria, they will receive a corrective payment.

    7. What happens if a member of staff left employment in the NHS before 31 March 2021?

    The framework only applies to staff employed by an NHS employer (as listed in Annex 1 of the handbook) on 31 March 2021.

    8. What happens if a member of staff has moved employers?

    If staff are employed by an NHS employer on 31 March 2021 (as listed in Annex 1 of the handbook) they may remain eligible for a corrective payment.

    Our previous advice was that ‘payments should be processed by the employer where the original work was undertaken and may mean that an individual receives a payment from multiple organisations’.

    However, we now advise that payments should be processed by the new/current employer. This is because in practice it is not possible for the previous employer to pay the member of staff as pay roll records are normally closed when an employee leaves employment. The new/current employer will need to consider the full position across all employments covering the corrective pay period, and request for evidence to be supplied.

    9. What happens if a member of staff has been TUPE transferred to a private company providing NHS services?

    This framework agreement will only apply to eligible staff employed by an NHS employer as set out in Annex 1 of the handbook.

    10. What if a member of staff has changed their [pay] banding over the last two years?

    Changes to roles or pay bandings should not affect eligibility to receive a corrective payment. The calculations will be based on the value of payments made for either overtime or additional standard time worked and recorded on the Electronic Staff Record (NHS national payroll system).

    11. A member of staff last worked overtime in March 2019 but not after. Will they be eligible for a corrective payment?

    Only employees who have worked overtime or additional standard time in a minimum of four months out of the twelve months in the financial year 2019-2020 (1 April 2019 to 31 March 2020) and/or 2020-2021 (1 April 2020 to 31 March 2021) will be eligible to receive a corrective payment.

    There may be some occasions where, for reasons of a protected characteristic, someone has not been able to meet the eligibility criteria (for example, maternity, or long-term disability related sick leave). Employers are urged actively to consider whether the criteria for eligibility should be adjusted in order to ensure that those with a protected characteristic impacted by such circumstances are not disadvantaged.

    12. A member of staff has recently changed jobs and no longer does regular additional work. Will they be eligible for a corrective payment?

    If an individual meets the eligibility criteria, they will be eligible for a corrective payment based on the overtime pay they received in one, or both, financial years 2019-2020 (1 April 2019 to 31 March 2020) and/or 2020-2021 (1 April 2020 to 31 March 2021).

    13. What happens if a member of staff leaves employment after 31st March 2021, but before payments or offers are made?

    If a member of staff was eligible to receive a corrective payment and was in employment on 31st March 2021, they will still be eligible for a payment. Employers should make arrangements to process payments in these circumstances.

    14. A member of staff retired from the NHS before 31 March 2021. Will they be eligible for a corrective payment?

    The framework agreement applies to staff employed by an NHS employer (as set out in Annex 1 of the handbook) on 31 March 2021. Any individual who has left NHS employment is not eligible for a corrective payment.
    15. A member of staff retired and returned before 31 March 2021 are they eligible for a corrective payment?

    The framework agreement applies to staff employed by an NHS employer (as set out in Annex 1 of the handbook) as of 31 March 2021. Any individual who is employed on this date and meets the eligibility criteria will be eligible for a corrective payment.
    16. What do members of staff do if they believe they are eligible, but their NHS employer says they are not?

    In the hopefully rare circumstances, where an employee does not believe that their overtime payments and any corrective payment has been correctly calculated, we would encourage conversations between staff and their line managers to address this issue in the first instance. Staff will need to provide evidence, for example, their payslips, payments that they have received for either overtime, or additional standard time. This information is important to help employers determine if staff are eligible.

    There may be some occasions where, for reasons of a protected characteristic, someone has not been able to meet the eligibility criteria (for example, maternity, or long-term disability related sick leave). Employers are urged actively to consider whether the criteria for eligibility should be adjusted in order to ensure that those with a protected characteristic impacted by such circumstances are not disadvantaged.

  • 1. What do NHS employers need to do to prepare?

    The national payroll system, the Electronic Staff Record (ESR) will publish information taken from the national payroll system which will help employers identify which staff will be eligible for a corrective payment and how much each member of staff will receive.

    2. How will employers know if staff have worked overtime?

    Most NHS employers use the Electronic Staff Record (ESR) HR and payroll system to manage payments to staff. ESR uses a system of pay elements to categorise payments into different groups reflecting payments for different types of work – for example to differentiate between basic pay, shift work or overtime. These pay elements, which are shown on staff’s pay slip, will be used as the basis to determine if they have completed additional activity.

    3. Will eligible staff need to make an application to get this payment?

    No. Payroll and HR departments will notify staff of their entitlement and how and when their corrective payment will be made. Staff will receive personal information about how their individual corrective payment has been calculated.

    4. When will the payment be made?

    NHS employers are committed to using all reasonable endeavours to make corrective payments to all eligible staff by 30 September 2021.

    5. Who will calculate the payment?

    Payroll departments will calculate the payment and notify staff of the amount and date of payment.

  • 1. A member of staff has a (stayed) legal claim – what will happen to that?

    NHS employers and trade unions have agreed to work collectively (both nationally and locally) to resolve outstanding legal claims.

    The existing legal claims lodged in the Employment Tribunal or the County or High Court, will be resolved through local settlement discussions between the relevant NHS employer and the claimant along with their legal advisor (COT3 settlement process).