Potential changes to holiday entitlement for part-year and irregular-hours workers
The Supreme Court in Harpur Trust v Brazel 2022 , ruled that part-year workers were not required to have their holiday pay pro-rated (the Judgement).
Following this, the UK Government launched a consultation to request feedback on proposals to pro-rata holiday entitlement for part-year and irregular hours workers based on the annual hours they work.
Last year, we commented on the calculation of leave entitlement for part-year workers, which you can find here.
The Judgement
In the Judgement, the Supreme Court held that the current 5.6 weeks’ (equating to 28 days) annual leave entitlement under the Working Time Regulations 1998 should not be reduced pro rata for “part-year workers”.
Part-year workers are those who are employed for the whole year but only work some weeks and not others.
The consultation states that, as a result of the Judgement, part-year workers are now entitled to a larger holiday entitlement than part-time workers who work the same total number of hours across the year.
Part-year and irregular-hours workers
Following the Judgment, the Government estimates that between 320,000 and 500,000 permanent term-time and zero-hours contract workers will receive more holiday entitlement.
Approximately 37% of these are workers in the education sector, such as teaching assistants who are employed on part-year contracts.
In the consultation, the Government proposes to introduce a holiday entitlement reference period for part-year and irregular-hours workers to ensure that workers’ holiday pay and entitlement is directly proportionate to the time they spend working.
How will this be calculated?
The reference period proposed for part-year workers and workers with irregular hours is based on “the hours worked in previous 52 weeks x 12.07%”.
For reference, the Government has noted that 12.07% is equivalent to dividing the hours worked by 46.4 and multiplying by 5.6. The entitlement would be expressed in hours.
The proposal is that this is calculated at the beginning of the leave year based on the hours worked in the previous 52 weeks, which would be simpler than a rolling reference period.
Accrued holiday entitlement for new starters would be calculated at the end of each month based on the actual hours worked in that month.
The following formula would be used:
Hours worked in the previous month x 12.07% = monthly statutory entitlement in hours.
Employers would have the discretion to allow workers to take holiday in advance of accruing it.
The consultation also proposes options as to how much holiday is used for one day off.
Nothing is said in the consultation paper about the accrual of holiday entitlement for those on maternity leave or other family-related leave.
What about agency workers?
Government analysis estimates that there are between 80,000 and 200,000 agency workers who may receive more holiday entitlement under the Judgment.
Consideration is also being given to making bespoke rules for agency workers with a contract for services with an employment business.
For agency workers, the Government is considering whether to calculate holiday entitlement at the end of each month as 12.07% of hours worked in that month.
Workers could then take their accrued holiday while on assignment or (for shorter assignments), could choose to take their holiday or receive a payment in lieu at the end of the assignment.
In either case, the holiday pay would be proportionate to the hours worked. It is also worth noting that under this proposal, agency workers would not accrue holiday in between assignments.
The next steps
The Government was seeking to understand the implications of the Judgment on different sectors, including agency workers and aims to ensure that any changes to the legislation do not have an adverse impact on other parts of legislation.
The consultation ended on 9 March 2023.
Once the outcome is known, employers will need to consider carefully which members of their workforce are affected by any changes, alongside how this fits with the contractual arrangements with those members of staff and how this will be managed.
For any questions or to discuss the guidance further, please contact Jill using [email protected] or 0191 211 7933.