News & Insights

Government Consultation on Holiday Entitlement – Have Your Say!

Following the controversial and much discussed decision of the Supreme Court in Harpur Trust v Brazel, the UK Government have launched a consultation on holiday entitlement for part-year and irregular-hours workers.

Last year, the Supreme Court held that holiday entitlement for workers with abnormal working hours must be calculated strictly in accordance with the Working Time Regulations, using the ‘calendar week’ method, even if this means that full-time workers are worse off by comparison. They rejected the popular ‘percentage’ method, under which holiday entitlement accrues at a rate of 12.07% of the hours actually worked by the employee. You can read more about this case and the different methods of calculating holiday entitlement in our article below.

The Supreme Court’s decision, while based on a sound reading of the Working Time Regulations, has caused a headache for many employers who currently use the percentage method to calculate holiday. While the percentage method simply requires multiplying hours worked by 12.07%, the calendar week method involves far more admin on the part of the employer. Furthermore, the calendar week method results in a situation where some part-year and casual workers receive a greater proportion of paid holiday than their full-time counterparts, relative to hours worked. Unsurprisingly, some employers and full-time employees are unhappy with this state of affairs.

Consequently, the Government launched a consultation on 12 January 2023, stating that they were “keen to address this disparity to ensure that holiday pay and entitlement received by workers is proportionate to the time they spend working”.

The Government is proposing that statutory holiday entitlement be pro-rated, such that part-year workers and workers with irregular hours receive leave proportionate to their total annual hours worked. The Government’s preference for achieving this is to introduce a new reference period of the previous fifty-two weeks for calculating holiday entitlement. Currently, holiday pay is calculated using a reference period of the last fifty-two weeks for which remuneration was paid to the worker. This means that, for those workers with abnormal hours, who may have weeks where they receive no remuneration, there is likely to be some divergence between the reference periods for holiday entitlement and holiday pay.

The Government’s suggestion would reintroduce the 12.07% figure for part-year and irregular hour workers – statutory holiday entitlement would be calculated by multiplying the hours worked in the previous fifty-two weeks by 12.07%. In the first year of employment, accrued statutory holiday entitlement would be calculated at the end of each month, by calculating the hours worked in that month by 12.07%.

While it is encouraging that the Government are looking at how to deal with the ramifications of Harpur Trust v Brazel, the current proposals may serve to introduce further complexity to the UK’s holiday entitlement rules, as they seem to necessitate the introduction of a new category of worker who is “part year” or on “irregular hours”. This new category will need to be clearly defined, and there will undoubtedly be edge cases where it is unclear what holiday rules apply. The consultation paper also does not deal with accrual of holiday for those on maternity leave or other family leave, which might clash with the proposed fifty-two-week reference period.

The consultation will last until 8 March 2023. Responses can be submitted online or via email.

If you would like advice on your employees’ holiday entitlement, or you would like assistance with drafting employment contracts or policies, please get in touch at [email protected]