In July 2022, the Supreme Court handed down its judgment on Harpur v Brazel, deciding that the correct interpretation of the Working Time Regulations 1998 is that holiday entitlement for part-year workers should not be pro-rated so that it is proportionate to the amount of work that they actually perform each year. Instead, the Court ruled that for part-year workers and those with irregular hours, entitlement to holiday is 5.6 weeks per year and holiday pay should be calculated by reference to average earnings over 52 weeks, not by reference to the hours worked. This sent a clear message to employers that the 12.07% “percentage method” of calculating holiday pay for part-year workers and those with irregular hours would potentially leave part-year workers without their statutory holiday entitlement.

This decision arguably left employers with more questions than answers when it came to the best approach for calculating holiday entitlements for atypical workers, however, we are sure that for many employers, a consultation and the prospect for new legislation on the matter will be a welcomed step towards clarity on the position.

The consultation does not appear to actively endorse the use of rolled-up holiday pay, but does seek to propose a new, fairer way of calculating holiday entitlement for atypical workers, which should result in atypical workers receiving an entitlement to holiday which is proportionate to the hours worked. Proposals include:

  • The length of the holiday entitlement reference period should mirror the length of the current holiday pay reference period (52 weeks). The proposal is that the weeks in which workers perform no work are included in the holiday entitlement reference period so that employers can pro-rate leave entitlements.
  • The method of calculating holiday entitlement for those with atypical hours should be:

Hours worked in the previous 52 weeks x 12.07 % = annual statutory entitlement in hours

  • Using a fixed reference period to calculate holiday entitlement as opposed to a rolling reference period. This means that at the beginning of a new leave year, the worker’s holiday entitlement would be calculated and fixed based on the previous leave year (52 weeks).
  • The method of calculating holiday entitlement for those in the first year of their employment should be:

Hours worked in the previous month x 12.07 % = monthly entitlement in hours

  • Although employers could exercise discretion to allow a worker to take more leave than they had accrued during their first year.
  • When calculating how much holiday would be used when taking a particular day off, using the 52 week reference period to calculate a flat average working day and then applying that figure to that day to understand how many hours would be taken.

Bevan Brittan will be submitting a response to the consultation and we would be interested to hear your views. Please find a link here to the full consultation.

What are your views on the Government’s proposals? Click the link here to complete our questionnaire and share your thoughts on how this affects your organisation. We would welcome any responses to the questionnaire by Friday 3 March 2023.

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