Holiday entitlement | Government launches consultation on part-year workers | Harpur Trust v Brazel

Government launches consultation on part-year workers | Harpur Trust v Brazel

By Michael Farry, HR Policy and Consultancy Manager, Moorepay

The government has launched a consultation on how employers calculate holiday entitlement for part-year workers.

In a sea of change for employers, the government hopes to tackle anomalies which arose out of last year’s Supreme Court ruling. Let’s take a look at where things were left following the Supreme Court’s judgement in the famous Harpur Trust case. We’ll explain the proposed changes and share what we think will happen next.

Where were we at?

Employers might be aware that term-time or ‘part-year’ workers – staff working part of the year on permanent contracts – are now entitled to a full year paid holiday allowance.

Following last Summer’s Supreme Court judgement in Harpur Trust, employers who pro-rated holiday entitlement for part-year workers had to immediately change their practice.

For many years, it had been common practice for employers to pro-rate holidays for part year workers. It was a perfectly logical and equitable approach. However, the Supreme Court ruled that such practices breached regulations 13 and 13a of the Working Time Regulations.

If you employ part-year workers, they must now receive a full 5.6 weeks’ holiday. You cannot prorate this amount to reflect the number of weeks they work. As an example, the holiday entitlement would become:

  • 39 (weeks worked) + 5.6 (holidays) + 7.4 (unpaid leave) = 52

The Supreme Court Judgment provides part-year workers with an advantage over their full-time colleagues. They get a full year’s holidays for a part-year’s work. Part-year workers also gain an advantage over part-time colleagues (i.e. staff who work all year). Their holiday entitlement can still be pro-rated. For instance:

  • Full time member of staff working all year 5 days per week = 5 x 5.6 = 28 days holiday

  • Part-time member of staff working all year 3 days per week = 3 x 5.6 = 16.8 days holiday

  • Part-year member of staff working 5 days per week, term time only = 28 days holiday

Among the headaches, employers have faced unauthorised deductions claims or Working Time Regulations claims from individuals paid under the 12.07% percentage method and costly settlements. Employers have also had to consider hiring part-year workers on short-term, temporary contracts despite wanting to retain individuals key to the business’ aims.

Where are we now?

Recognising these anomalies, the government has opened a consultation on how employers should calculate holiday entitlement for part-year workers, stating it should be ‘proportionate to the time they spend working’. If enacted, the proposals will entirely upend the Supreme Court decision.

To address the disparity, the government proposes to replace the 52-week holiday reference period. Currently, weeks in which no remuneration is earned are counted for part-year workers’ holidays.

In brief, it is proposed that:

1. Employers would be able to exclude weeks with no remuneration from the 52-week calculation. The intention being that they should receive no greater holiday entitlement than a part-time colleague who work the same number of hours but throughout the year.

2. The current requirement to calculate holiday entitlement based on a rolling 52-week period be replaced with a fixed period, based on the 52-weeks prior to the start of the current holiday year. This would mean that the worker’s holiday entitlement could be calculated at the outset of each holiday year (assuming they’ve been in employment for at least 52 weeks).

3. The consultation also envisages the return of the previous 12.07% formula for calculating holiday pay.

Confusingly, workers whose hours of work are irregular, but who work year-round, also appear to be included in the consultation.

We also view the proposition of discounting all weeks where no work is undertaken with caution. Doing so could, inadvertently, call into question any other leave a part-year or irregular hours worker might be authorised to take (e.g. sickness absence, maternity leave, sabbaticals, parental leave etc.) when calculating holiday entitlement. Any legislative oversight or action taken by an overzealous HR practitioner could leave employers exposed to fresh claims.

Furthermore, for part-year workers without 52-weeks service, the government proposals suggest holiday entitlement could be calculated at the end of each month, based on hours worked. While this could work well for workers with fixed hours of work, it doesn’t for casual workers or those whose hours vary, making it difficult to plan ahead.

What can we expect next?

Importantly, the acceptable approach to take when calculating holiday entitlement for part-year workers, or indeed any workers on irregular hours, hasn’t changed. Employers must continue to follow the findings of the Supreme Court decision in Harpur Trust and disregard the government’s current proposals.

In commencing the consultation, the government hopes to understand the implications of last year’s Supreme Court ruling for employers across all sectors. Employers have until 8 March 2023 to respond to the consultation and help inform the approach to be taken by the government when putting forward new legislation to parliament.

At Moorepay we’re keenly aware of the headaches caused by the anomalies which arose out of Harpur Trust, having already anticipated a need for greater clarity in the government’s thinking. And because there’s room for further confusion, we think it imperative that affected employers respond to the consultation without delay. If you need a HR advice line you can count on 365 days a year for such advice, Moorepay’s HR Services might be for you.

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