The consultation recognises that holiday entitlement and pay legislation have become an incredibly complex area of employment law and has been launched to try and clarify the position for employers (who need to calculate holiday entitlement for their workforce) and workers (who need to understand their rights when it comes to holiday entitlement and pay).
It has also been introduced in response to the Supreme Court ruling in Harpur Trust v Brazel which has created a disparity in holiday entitlement for part-year workers/ workers with irregular hours.
As a result of this ruling it is thought that between 320,000 – 500,000 permanent part-year workers/ zero-hour workers, of whom some 37% are in the education sector, could receive more holiday pay. The Government is:
- keen to ensure that part-year workers and workers with irregular hours receive holiday entitlement which reflects the hours that they have worked (as was the case before Harpur Trust v Brazel).
- urging people to share their views during the consultation period, and there are a number of platforms via which people can contribute these to the consultation, either on behalf of themselves or an organisation.
Proposed method for calculating holiday entitlement
It is proposed that calculating holiday entitlement for part-year workers or workers with irregular hours will based on “fixed-pot”. This pot will be calculated based on the number of hours worked by the individual in the previous 52-week period. It is important to note that weeks where no work is undertaken will be included within this 52-week reference period.
The calculation would be 12.07% (yes, back to this method!) of the hours worked in the 52-week reference period i.e:
- Calculate the total hours the worker has worked in the prior 52 weeks, including weeks not worked.
- Multiply the total hours worked by 12.07% to give the worker’s total annual statutory holiday entitlement in hours.
The Government considers it is important for non-working weeks to be included so that the holiday entitlement of these workers is more closely aligned to the actual time they spend working.
If non-working weeks are not included, it would encourage employers to give workers one or two hours work each week to ensure these counted towards the holiday entitlement calculation, which would have the effect of reducing the worker’s holiday entitlement and pay
This approach is therefore considered fairer, and also makes the calculation easier for employers who do not have to use a difference reference period for each worker due to excluding certain weeks. There are two options:
- A fixed-reference period (considered the best option by the Government) whereby, at the beginning of the leave year, the previous 52-week period is considered to decide the holiday entitlement of the worker for the following year.
- The other option would be to have a “rolling” reference-period, whereby each time a week is completed, the last of the 52-week period is pushed out, but this risks workers not knowing what their holiday entitlement is during the year.
A fixed reference point has the advantage of both employers and workers knowing exactly what their holiday entitlement is at the beginning of the leave year.
This proposed method would not work in the first year of employment as there would be no 52-week reference period to use. Therefore, during a worker’s first year, holiday entitlement would be worked out at the end of each calendar month by multiplying the hours worked during that month by 12.07%.
Potentially this raises the question as to what to do with the entitlement gained in the 12th month of employment as it is only calculated at the end of the year so may need to be carried over into the next holiday year. This would be at the discretion of employers to allow leave to be taken in advance of being accrued. Hopefully this point will be clarified.
Employers will therefore need to keep records of hours worked up to date.
A day’s holiday
The proposal also covers the need to address how much holiday would be taken by a worker with irregular hours taking a day off. Two methods are considered:
- Flat average working day. If a worker took a day off, they would subtract the number of hours calculated from an average working day. This could lead to workers taking particular days off where they would work fewer hours, as they may be paid more for this holiday if the average is higher. Similarly, it could lead to employers refusing holiday on these days. This is the method favoured by the Government.
- Average hours worked for specific days. If a worker wanted to take Monday off, the employer would look at the average hours that a worker worked on Mondays during the reference period. This would avoid the potential issues with the above method, but would create more of a burden for employers.
The Consultation opened on 12 January 2023, and is due to close 9 March 2023. To access the consultation, and to respond, please click here.