The Department for Business, Energy and Industrial Strategy (“BEIS”) has now closed its consultation in response to the Supreme Court’s ruling in the Harpur Trust v Brazel case regarding holiday pay calculation for part-year workers, and is analysing the public’s feedback.
Last year’s judgment impacts holiday entitlement for workers with permanent contracts who only work part of the year, including those working term-time or on zero-hour contracts. The “percentage method” of calculating holiday pay, which simply added 12.07% to earnings, has been outlawed, and employers must now provide a minimum of 5.6 weeks’ holiday pay to all part-year workers without the possibility of pro-rating. The education sector has been particularly affected, with over a third of impacted term-time and zero-hour workers employed in this sector.
Although the judgment is not expected to significantly impact holiday pay for most workers, it could result in anomalous outcomes for some staff. The Supreme Court cited the example of an invigilator who receive holiday pay that is greater than their wages after only working 1-2 weeks per year. The Supreme Court’s decision focused on ensuring minimum entitlements for workers, rather than fairness for those who may benefit disproportionately. Additionally, the practical implementation of the Supreme Court’s calculation, which averages weekly pay from the previous 52 weeks and multiplies it by 5.6 weeks, has become a source of difficulty for employers. Government guidance suggests calculating average hours worked in a “representative reference period,” but uncertainty remains in calculating holiday pay for new hires and those with irregular working hours. This also results in unfairness for employees with different work patterns.
Given these issues, the BEIS is concerned that the Working Time Regulations 1998 are not fulfilling their intended purpose and aim to provide clarity to workers and employers through a clear method of calculating holiday entitlement. The government has proposed a method of amending the law, which involves including weeks not worked in the 52-week reference period and multiplying total hours worked by 12.07% to calculate holiday entitlement. The government invited responses from individuals and organisations, the deadline for which was 9 March 2023. Despite the Code of Practice on Consultation recommending a minimum of 12 weeks consultation period, this consultation was only open for 8 weeks, indicating that a possible change in the law could be expected sooner rather than later.
The Harpur Trust v Brazel ruling continues to remain binding in the meantime, and failure to provide holiday pay accordingly may result in employment tribunal claims for the unlawful deduction of wages. In contrast, those who have already altered contracts may soon wish to renegotiate depending on the outcome of the consultation process. The government’s intention to swiftly resolve the confusion caused by the Harpur Trust ruling is some comfort for employers, and with up to 700,000 workers benefiting from increased holiday entitlements following the ruling, there will be many eagerly awaiting the outcome
