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New consultation on calculating holiday entitlement

18 January 2023

The government has launched a new consultation on calculating holiday entitlement for part-year and irregular hours workers.

The government consultation is in response to the recent Supreme Court decision in the case of Harpur Trust v Brazel.   The government recognises the complexity of holiday pay and entitlement legislation and that in some circumstances the legislation may not be fully achieving its original intention.  The consultation closes on 9 March 2023. 

Background

In the case of Harpur Trust v Brazel the Supreme Court held that part-year workers (for example term-time only workers) should not have their holiday pay restricted to a 12.07% cap of their annualised hours.  Instead the Supreme Court held that part-year workers on permanent contracts should receive 5.6 weeks of annual leave and that their holiday entitlement should be calculated using a 52 week holiday entitlement reference period.  Of particular relevance for part-year workers is that any weeks where no remuneration has been received must be ignored and an earlier week taken into consideration (up to a maximum of 104 weeks).  The anomaly caused by this decision is that part-year workers are now entitled to a higher rate of annual paid holiday entitlement than part-time workers who work the same total number of hours across the year. 

The consultation

The government is consulting on the proposal to introduce a 52 week holiday reference period for part-year and irregular hours workers based on the proportion of time spent working over the previous 52 week period.  In order to address the disparity arising from the Harpur Trust case the government proposes that weeks in which workers perform no work are included in the holiday entitlement reference period. 

Comment

Calculating holiday entitlement and pay is a notoriously complex process for employers.  The consultation sets out that the new proposal is a more equitable approach to calculating holiday entitlement as workers will receive entitlement which is directly proportionate to the hours they have worked.  The administrative burden of excluding weeks when no work has been performed will also be lifted. Having to do a different calculation for each worker based on when they did not work over the 52 week reference period is a time-consuming task. 

Acknowledging the intricacies of the legislation the government consultation is seeking to understand the implications of the Harpur Trust judgment on different sectors including agency workers who have "complex contractual arrangements".  Tackling this issue certainly appears to be a step in the right direction for simplifying holiday entitlement calculations for employers, however It is crucial that any changes implemented following the consultation do not inadvertently impact other parts of the legislation. 

The courts have been wrestling with the interpretation of the Working Time Regulations 1998 through case law for over two decades.  It is interesting to see the government taking proactive steps to deal with an area of concern.  It may well be that we see more government led consultations on this topic in the future as there is a continued drive to improve the economy and reduce the regulatory burden on employers. 

For further information please see the government press release.

Further Reading