Consultation announced for holiday calculations for ‘part-year and irregular hour workers’

The recent Supreme Court judgement of Harpur Trust v Brazel has turned on its head the way Employers should calculate holiday pay for “part-year” workers, specifically in relation to workers who only work for some weeks whilst being employed for the whole year, and those who work irregular hours.

Under the Working Time Regulations workers in the UK, including part-time workers, are entitled to a minimum of 5.6 weeks’ annual leave, and that pay during any annual leave should be based on the rate of a week’s pay. Previously, employers have calculated holiday entitlement as accruing at a rate of 12.07% of hours worked. However, the Supreme Court rejected this method of calculating holiday pay, and further stated that it should not be used going forward.

Instead, a worker’s entitlement to 5.6 weeks’ holiday exists regardless of the amount of work done. The Supreme Court ruled that the correct method of calculating holiday pay is to calculate what a “week’s pay” is for that employee based on a reference period of the last 52 weeks, ignoring any week during that period where no pay was received. The average week’s pay is then used for the worker’s holiday pay.

This judgement has already produced numerous anomalies, and in some circumstances, it could result in a part-time worker receiving more paid leave than a full-time worker.

For those of you who read of Employment & Regulatory update* we predicted that this judgement would cause much debate, not least because we didn’t believe that the Court envisaged ‘betterment’ for part time, irregular hour workers.

It has therefore come as welcomed news that the government has announced a Consultation
seeking views on introducing legislation that will effectively reverse the Supreme Court ruling by allowing employers to pro-rata holiday entitlement for part-year workers and workers with irregular hours. Furthermore, the Consultation will consider whether it is correct to include weeks not actually worked in the ’52-week reference period’, or whether weeks not worked should be disregarded.

The consultation closes on 9 March 2023, and all are encouraged to contribute to the Consultation. For further details click here.

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