Holiday pay for part-time workers – is the law giving them ‘too much’ holiday?

The Government has announced the commencement of consultation into the calculation of holiday pay for part-time/part-year workers, following the Supreme Court decision in the case of Harpur Trust v Brazel, which held that those who work part-time are still entitled to the minimum 5.6 weeks annual leave entitlement because there is nothing in the legislation that says differently.

The net effect of this is that in some cases, those who work part-time may have more holiday entitlement compared to the number of hours they work, than those who work full-time. The Government has announced a consultation to try and correct anomalies in the calculation of holiday pay for part-time/part-year workers which the legislation may have inadvertently brought about, as highlighted by this judgment.

How do you calculate holiday for part-time workers now?

Until this judgment, those who worked part-time had their holiday entitlement pro-rated by reference to the number of hours or days that they worked. Following the judgment, this is now no longer the case.

The judgment has, in particular, thrown many in the education and health and social care sectors into confusion because a great deal of these organisations have part-time and zero hours contract workers and they are now in limbo as to how to calculate, and apply, holiday entitlement.

The government consultation will last eight weeks and responses must be received by 9 March 2023.

Has the law changed on holiday pay for part-time workers?

At time of writing: not yet, the government is currently in consultation for any changes.

The proposal put forward by the Department for Business, Energy, and Industrial Strategy is to bring in a holiday entitlement reference period for part-year and irregular hours workers, so that their holiday pay and entitlement is directly proportionate to the time they spend working.

They anticipate this will work by calculating the hours worked in the previous 52 weeks and multiplying them by 12.07% to give a part-year worker annual statutory entitlement in hours. Interestingly, it was this very percentage which was outlawed by the Supreme Court judgment.

The important point to note is that the reference period proposed is 52 calendar weeks, including any weeks in which no work was performed. This differs to the calculation for pay for holiday (as opposed to the entitlement itself), which requires employers to average the amount of pay over a 52-week period discounting any weeks in which no work was done so no pay was earned; and allows employers to go back up to 104 weeks to find an average using weeks where work was performed.

Part of the consultation is to enable BEIS to understand how holiday entitlement is calculated for agency workers and how the consultation proposal might be implemented.

What does this mean for employers, and how can they provide feedback on the plans?

The fact that the consultation process is only 8 weeks indicates that the Government sees this as a high priority to have resolved because of the issues it is creating for a huge number of employers and for their staff. However, further changes may well cause even more headaches for those in HR grappling with the issues of staff on zero hours contracts and variable hours.

We will report back as soon as the outcome of the consultation is known but if anybody wishes to participate, full details are available at the link below.