How should holiday entitlement for part-year workers be calculated?

The Government has commenced consultation on the calculation of holiday entitlement for part-year and irregular hours workers. This follows the Supreme Court judgment in the case of Harpur Trust v Brazel.

Consultation

Workers are entitled to 5.6 weeks of paid annual leave under the Working Time Regulations 1998 (the Regulations). However, the Regulations do not clarify how to calculate holiday entitlement for part-year workers on permanent contracts. The Supreme Court found that the correct interpretation of the Regulations is that holiday entitlement for part-year workers should not be pro-rated so that it is proportionate to that of a full-time worker. As a result, the Supreme Court found that employers should not use the 12.07% method for calculating holiday entitlement.

The consultation proposes to introduce a holiday entitlement reference period to ensure that holiday pay and entitlement for part-year and irregular hours workers is directly proportional to the time the individual spends working. The aim is to ensure that part-year workers and workers with irregular hours receive holiday entitlement and pay which reflects the hours that they have actually worked. It suggests that the simplest way to do that would be to introduce a 52-week holiday entitlement reference period; and that this reference period should include those weeks without work.

The Government’s proposed method of calculating holiday entitlement is:

Calculate the total hours a worker has worked in the previous 52 weeks, including weeks without work. The consultation includes whether this should be a fixed or a rolling reference period.
Multiply the total number of hours by 12.07 to give the worker’s total annual statutory holiday entitlement in hours.

Holiday pay entitlement in these circumstances is already calculated using a 52-week reference period, but weeks in which work is not carried out are not counted.

Comment

The Government has estimated that between 320,000 and 500,000 permanent term-time and zero-hours workers will receive more holiday entitlement following the Supreme Court judgment. Approximately 37% of those workers are in the education sector.

This consultation will be of significant interest to businesses that engage zero hours or casual workers, as well as those that engage part-year workers and whose hours vary, on permanent contracts. Consultation ends on 9 March 2023.

18 January 2023

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