Following the Supreme Court judgment in Harpur Trust v. Brazel in July 2022, the UK government has launched a consultation regarding the calculation of holiday entitlement for part-year and irregular hours workers.
Effects of Harpur Trust v. Brazel
The Supreme Court has concluded that the correct interpretation of the Working Time Regulations 1998 is that the holiday entitlement for part-year workers should not be prorated such that it is proportionate to the amount of work actually performed during the year. The statutory annual holiday entitlement of 5.6 weeks should not be prorated because part-year workers are employed throughout the year. This means that workers who only work for a certain number of weeks can end up with more days’ holiday relative to the hours they work each year.
As a result, part-year workers may be entitled to more paid annual holiday than their counterpart part-time workers who work the same number of hours across the year but fewer hours each week. Following this judgment, it is estimated that between 320,000 and 500,000 permanent term-time and zero-hours contract workers will receive an increased holiday entitlement.
Consultation proposals
The government has launched a consultation seeking views on how to resolve this unintended result. This includes its own suggestions of different ways in which employers could prorate the holiday entitlement for part-year and other workers with irregular hours. These suggestions are:
- Introducing a 52-week holiday entitlement reference period for part-year and irregular hours workers.
This is proposed as a clearly defined method that would resolve the anomaly between part-year and part-time workers by allowing employers to prorate holiday entitlement for the former. The result would be that their holiday entitlement would be proportionate to their annual hours worked. It would bring the holiday entitlement of part-year workers into line with the entitlement of part-time workers who work the same number of annual hours.
- Including weeks in which workers do not perform any work within the 52-week holiday entitlement reference period.
This is put forward to make the part-year workers’ annual holiday entitlement proportionate to the actual time that they spend working, rather than based on the length of employment. It would be a simpler approach for employers to administer as they would use a standard 52-week reference period instead of excluding different unworked weeks for different workers.
- A new two-step method of calculating annual leave entitlement for part-year and irregular hours workers.
The steps involve:
- first, calculating the total hours a worker has worked in the previous 52-week reference period; and
- secondly, multiplying the total hours worked by 12.07% to obtain the total annual statutory holiday entitlement in hours. (Using this 12.07% for holiday pay was one of the points rejected in the Brazel decision.)
- Using a fixed reference period to calculate future holiday entitlement.
A worker’s holiday entitlement at the beginning of a new leave year would be calculated based on the previous 52 weeks. This would mean that a worker’s holiday entitlement would not increase if they worked more hours than in the previous year – or decrease if it turned out they worked fewer. It would therefore provide some certainty about the number of hours’ holiday available in the coming year to both parties in the same way that workers with regular hours have. It is not clear how this would provide adequate holiday if a worker’s hours significantly increased.
In the first year, the consultation paper proposes calculating holiday entitlement at the end of each month.
- Using the reference period to calculate a flat average working day.
When a worker has irregular hours, it can be uncertain how many hours they need to take off to have a holiday on a particular day. The consultation proposes using the fixed 52-week reference period for workers with irregular hours to calculate a “flat average working day”. A day’s holiday (and pay) would then be based on this flat average day. The consultation acknowledges that this could incentivise workers to take holidays on days with few hours to maximise holiday pay and minimise time off, while incentivising employers to decline such requests.
Moving forward
The consultation is currently open and will close on 9 March 2023. The government is looking to gather as many stakeholder views as possible due to the wide-reaching implications of the subject matter, and the consultation can be responded to by employers, workers, business representative groups, unions and those representing the interests of groups in the labour market. Employers should keep an eye on our newsletter for updates on this consultation and the response that will be published by the government following the conclusion of the consultation.
If you would like to discuss anything in this article, or would like guidance from an employment perspective, please contact a member of our team.
