The Government has launched a consultation on calculating holiday entitlement for variable hours and part-year hours workers.
What is a part-year worker?
A part-year worker is someone who works for part of the year under a permanent or continuous contract. These workers do not work the same number of weeks as other full-time or part-time workers. An example is an individual who works in a school and only works during the school terms (also known as term-time only).
What is a variable hours worker?
Variable hours workers do not have set hours and can work irregular hours during a working week. They have no fixed working pattern.
The consulation
All workers are entitled to 5.6 weeks’ paid holiday each year.
The consultation follows the decision in Harper Trust v Brazel from the Supreme Court last year, in which it was held that holiday entitlement under the Working Time Regulations 1998 for permanent part-year workers should not be pro-rated so that it is proportionate to that of a full-time worker.
The Government predicts that the Harper Trust v Brazel decision will benefit 320,000 to 500,000 permanent term-time and zero hours contract workers, with approximately 37% of these workers in the education sector. However, the decision has resulted in part-year workers being entitled to a larger annual paid holiday entitlement than part-time workers who work the same total number of hours across the year.
It is acknowledged in the consultation paper that the Supreme Court’s interpretation of the Working Time Regulations 1998 for workers without normal working hours does not reflect the intention of this legislation.
To address this disparity, the Government has launched a consultation seeking views on introducing legislation that allows employers to pro-rate holiday entitlement for part-year workers and variable hours workers so that they receive leave in proportion to total hours worked.
It is suggested that this might be achieved by introducing a 52-week holiday entitlement reference period, based on the proportion of time spent working over the past 52 weeks to include weeks when no work was undertaken. At the moment, any weeks spent not working are discounted from this calculation and employers must count back further working weeks to make up the full 52 weeks. To summarise, under this proposal, holiday pay will be pro-rated as it is for year round staff.
Another suggestion is that the Government is intending to endorse the 12.07% method and allow employers to calculate holiday entitlement in hours. However, the 12.07% method would be used to calculate the following year’s entitlement, rather than the current year’s, by calculating 12.07% of the total hours worked to give the holiday entitlement in hours. In the first year of employment, this would accrue on a month-by-month basis – 12.07% of hours worked in that previous month (on a cumulative basis throughout the year).
It is clear that the Harper Trust v Brazel decision has created more issues than it solved. However, it is promising to see that the Government is being proactive and taking steps to address disparity, which in turn will hopefully make calculating holiday pay easier for employers.
The consultation closes at 11.45pm on 9 March 2023.
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