As a result of last years ruling in Harper Trust v Brazel, the government have lodged a consultation to address the complexities surrounding calculating holiday pay correctly.
In July 2022, the Supreme Court confirmed in the Brazel ruling that part time workers should receive 5.6 weeks’ statutory holiday pay. This means that part time workers are afforded the same holiday entitlement as full time employees. Of course, part time workers leave shall be apportioned to reflect the number of hours they work compared to a full time worker. For example, if they work 50% of the hours, they shall be entitled to 2.8 weeks leave (50% of 5.6 weeks).
For many years there had been confusion as to whether, when calculating holiday pay, employers should be using the 12.07% method which is where individuals would receive 12.0% of their pay when they took annual leave or by calculating the average pay received by the worker over the previous year.
The Brazel ruling confirmed that employers must calculated the average pay received during the 52 week period immediately prior to the employee taking annual leave, ignoring any weeks where the employee did not work. This decision means that the 12.07% approach should no longer be used and impacts those employees with atypical working patterns who do not work a full leave year. For examples, those who work in education which operate on a termly basis.
This ruling may have serious financial implication for employees as well as negatively affecting employee relations. The result of the Supreme Court’s decision is that part time employees who work an atypical work pattern, but work high hours over fewer weeks may be hit hard and receive a lower pay than those who work the same hours, evenly spread over more weeks. Therefore, animosity maybe created between individuals.
The Department for Business Energy and Industrial Strategy’s (BEIS) consultation intends to ensure part year workers pay is inline with full year workers. The BEIS proposal is to introduce a 52 week holiday entitlement reference period for workers with irregular hours. While this approach may confuse holiday pay and holiday entitlement, it would remove the unfairness currently in some situations which results in an over entitlement to holiday pay. BEIS states that between 320,000 and 500,000 permanent term time and zero hours contracts will be affected by this proposal which may cause a headache for employment and HR professionals. However, increased clarity and guidance on an area of law which for some time has been complicated and which can be difficult to get right, can only be a positive.
At Davenport Solicitors, we shall be keeping an eye out on the outcome of the BEIS consultation and any changes to legislation. Therefore, if you would like to speak to a member of our employment teams regarding the calculation of holiday pay, please email contact@davenportsolicitors.com or telephone 02079036888.
