Holiday Pay Calculations: Consultation Period
The government has issued a consultation containing proposals for legislative reform to address the challenges faced by many employers in response to the Supreme Court’s decision in Harpur Trust v Brazel last year.
Last year the Supreme Court ruled that all workers (including part-year and other irregular-hours workers) are entitled to 5.6 weeks’ paid leave per year, irrespective of the number of weeks worked, and that their holiday pay should be calculated in line with the relevant statutory provisions. Further details can be found here.
The key proposal in the consultation document is that the statutory annual leave entitlement for part-year and casual workers should be calculated in two steps:
- Calculate the total hours a worker has worked in the previous 52-week reference period, including any weeks without work
- Multiply the total hours worked by 12.07% to determine the worker’s total annual statutory holiday entitlement in hours
At the beginning of a leave year, an employer will be required to look over the total hours worked in the previous 52 weeks (including non-working weeks) and use that figure to determine the worker’s annual leave entitlement for that leave year.
How does this work for the first year of work or casual workers on short-term assignments? Employers will be required to work out a worker’s statutory holiday entitlement, in hours, on a monthly basis by reference to the number of hours worked in the previous month multiplied by 12.07%.
Agency workers are also covered by this consultation. When an agency worker is on assignment, their holiday entitlement should be calculated by 12.07% of the hours worked over the previous month. If an agency worker is not on an assignment, they will not accrue holiday.
The consultation document also proposes a new means of calculating how much of their holiday entitlement a worker uses when they take one day off. The suggestion is that employers calculate a flat average working day based on the average number of hours worked during the relevant reference period.
The consultation closes on 9 March 2023. Due to a short consultation period, it suggests that the government is keen to crack on with its proposals and that we can expect implementing legislation sooner rather than later if the proposals gain the backing of affected employers.
Related articles:
Case Law: Harper Trust v Brazel
