Government consultation on calculating holiday entitlement for irregular and part-year workers
Following the Supreme Court’s decision in Harpur Trust v Brazel, it is no longer lawful to pro-rata holiday entitlement for irregular or part-year workers on the basis of the amount that they have actually worked in a leave year. Up to that point, employers would normally use 12.07% to calculate such workers’ holiday entitlement – the right to do so ended with the Supreme Court’s judgment.
The practical effect of this is that irregular and part-year workers are entitled to a minimum of 28 days’ paid annual leave irrespective of how much they actually work. This, on top of the fact that working out holiday pay under these circumstances involves calculating a 52-week rolling average (ignoring any weeks where no income was earned), meant a major headache for employers.
This hasn’t gone unnoticed by a government notoriously unsure about rights provide by the Working Time Regulations 1998, including annual leave. Consequently, the government has opened a consultation this month into potential legislation aimed at addressing the issues tackled by the Supreme Court.
Whilst matters are at a very early stage and there is no saying what (if anything) may come of this, the consultation paper makes clear that the intention is to ensure that irregular and part-year workers’ holiday entitlement and pay reflects work actually performed. In other words, the plan is to reverse the current legal position created by Brazel.
This is obvious in the government’s stated proposals which include:
- Ensuring that weeks in which no earnings are received are included in the 52-week holiday pay average;
- Allowing employers to calculate annual leave entitlement by calculating the total number of hours worked over the previous 52 weeks (including those where no work was done) and then multiplying this by 12.07%;
- Defining the holiday entitlement reference period as a fixed reference period of 52 weeks rather than the current rolling 52-week reference period; and
- Using a flat average working day to calculate how much holiday an irregular or part-year worker would use to take a day off instead of calculating the average hours worked for specific days.
If these changes were implemented, this would essentially mean going back to the pre-Harpur position in terms of calculating entitlement. The 12.07% calculation, commonly known as the percentage method, would be lawful once again (to the likely relief of most employers).
However, these changes go even further as Harpur simply repeated the current law in terms of working out pay: calculate the average pay over a rolling 52-week period ignoring any weeks where nothing was earned. The consultation proposals, if enacted, would make fundamental changes to this by removing the rolling reference period and now including weeks where nothing was earned.
This will be welcome news to employers who will no doubt be in favour of changes which would limit irregular/part-year workers’ entitlement, make it easier to work out pay and reduce the cost of holiday pay for such workers. The other side of this coin is that these workers will no doubt push back against such changes which would make their already precarious position that much more difficult.
It’s important to bear in mind that the consultation doesn’t close until March 2023 and there is no indication when any legislation on this issue would be presented to Parliament. For now, the Harpur judgment remains in force and will so unless/until the law of the land is changed. If that were to happen, this would be yet another incendiary labour issue for employers and employees to deal with in a period where industrial action shows no sign of letting up.
Author: Jonothan Scollen, Employment Law Solicitor at Howarths
If you have any questions about this article or about the calculation of holiday entitlement and/or pay for irregular, casual and/or part-year workers, please don’t hesitate to contact the employment team on 01274 864999.