In July 2022, the Supreme Court issued its decision in Harpur Trust v Brazel [2022] UKSC 21. The widely reported ruling completely shifted the understanding of how employers should calculate annual leave entitlement and pay under the Working Time Regulations 1998 (WTR) for part-year workers, i.e. those who do not work throughout the full holiday year.
You can read more from our Employment Law experts on the decision here but, to summarise, the Supreme Court’s judgement means that:-
- While part-year workers are entitled to 5.6 weeks’ annual leave each year under the WTR, employers cannot apportion part-year workers’ 5.6 weeks to the part of the year they worked if they are under contract for the whole year; and
- Employers have to calculate a week’s holiday pay by averaging the last 52 weeks in which the part-year worker actually carried out work; this means that employers need to discount the weeks in which the part-year worker did not work in order to calculate a week’s holiday pay.
What does this mean in practice?
The effect of this is that both holiday entitlement and pay are not calculated in accordance with the time worked for part-year workers.
By giving part-year workers the full 5.6 weeks’ of annual leave and calculating their week’s holiday pay without reference to weeks in which they earned nothing, part-year workers could be entitled to the same amount of annual leave as someone who works full-time for the whole year or, to more holidays than an all year round part-time worker who does the same amount of hours as them in the leave year.
Some sectors have been impacted more than others by this decision, with the Government estimating that approximately 37% of the 320,000 to 500,000 permanent term-time and zero-hours contract workers who could see an uplift in their holiday pay work in the education sector.
Undoubtedly though any organisation which employs term-time or seasonal staff along with zero hours, casual or bank staff will have had to reconsider its holiday calculations in light of the Brazel judgment last year.
What is the position now?
On 12 January 2023, the UK Government launched a consultation paper on calculating holiday entitlement for part-year and irregular hours workers.
You can view the consultation paper here which sets out the Government’s proposal to introduce legislation which will amend the Working Time Regulations and pro-rate holiday entitlement and pay for part-year staff so that it is directly proportionate to the time they spend working.
As part of this consultation, the Government says that it wants to remove barriers to economic growth by simplifying the holiday pay and entitlement rules and make it is easier for employers to comply with the law.
It aims to do this by introducing ‘a 52-week holiday entitlement reference period for part-year workers and workers with irregular hours, based on the proportion of time spent working over the previous 52-week period.’ Importantly, this 52 week reference period would include weeks in which workers perform no work to avoid the current anomalies from recurring. As a change to the Working Time Regulations is the only way in which resolve the current approach, this consultation is to be welcomed, and any resulting changes need to happen as quickly as possible.
The consultation closes on 9 March 2023 but it remains to be seen what legislative changes will actually come to fruition on the back of it. Until any changes are made, employers should continue to calculate holiday entitlement and pay using the method set out by the Supreme Court in Brazel.
If you would like to discuss this issue in more detail, please contact a member of Thorntons’ Employment team on 03330 430350.
