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Published 25 January 2023
The Government have issued a consultation paper to address the issues that have arisen out of the Supreme Court’s Judgment in Harpur Trust v Brazel – see our previous alert here.
The rules for calculating holiday pay for ‘part year’ and ‘irregular hours’ workers were recently confirmed by the Supreme Court in the Harpur Trust v Brazel case. Whilst the case may be legally correct, it has had a number of bizarre results and unintended consequences.
- One consequence of skipping weeks not worked is that a ‘part year’ worker (on a permanent or zero hours contract) or an ‘irregular hours’ worker could be entitled to proportionately more holiday than, say, a comparable full time or part time worker with fixed hours through the year. For example, in the Harpur Trust case the holiday pay for the employee concerned was calculated to be 17.5% of her annual pay.
- The amount of holiday entitlement can be totally different to the actual hours being worked (or expected to be worked) in the current holiday year. Taking into account the hours worked in the previous worked 52 weeks could involve looking back over multiple holiday years.
- It can be very difficult, in some cases impossible, to calculate the holiday entitlement that an irregular hours worker is entitled to in advance.
- The precise amount of holiday entitlement the irregular hours worker is entitled to can vary depending upon when they chose to take that holiday.
The Government is proposing a dramatic simplification of the current rules to calculate holiday entitlement – i.e. how many days/hours holiday a ‘part year’ or ‘irregular hours’ worker is entitled to.
However please note the Government is not proposing to change the rules to calculate how much pay a worker is entitled to receive for each day/hour taken as holiday. The existing rules would still apply to pay (i.e. looking back over a rolling 52 weeks and skipping any unworked weeks).
- The Government recognises that their suggested approach may give employer’s an incentive to offer a worker a small number of hours in a week (instead of offering no work at all). For example, giving a worker a single hour of work would mean the week counted towards the holiday entitlement calculation, reducing the worker’s total holiday entitlement and would also count towards the calculation of holiday pay.
- However the Government feel that their proposed approach is fairer and simpler for employers to administer.
- A special rule would apply in the first year of employment and holiday entitlement would accrue from month to month.
In year one: Monthly holiday entitlement (in hours) = 12.07% of hours worked in previous month
Thereafter: Annual holiday entitlement (in hours) = 12.07% of total hours worked over the 52 week reference period
Essentially the Government is asking for views on:
For employers who have historically calculated holiday entitlement using the 12.07% multiplier (such as in-house staff banks and employers engaging on annualised hours), and commonly produced a holiday entitlement for these workers in hours, any legislation that comes into force in line with these proposals would be very welcome.
We will be submitting a response to the consultation and are collating views from our clients and contacts to inform that response.
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