Following the controversial decision by the Supreme Court in Harper Trust v. Brazel, the government has issued a consultation paper on proposals to rectify the impact of the case when calculating holiday pay for employees who have varied and irregular hours.
Background
Previously, employers were able to use 12.07% of hours worked to calculate holiday pay for part-year employees. In the Harper case, the Supreme Court ruled that where employees operated varied and irregular hours, the 12.07% rule was not appropriate. Instead, they ruled that employees were entitled to 5.6 weeks of annual holiday entitlement, and employers should calculate holiday pay by averaging hours worked and pay received over a 52-week period (52 weeks where actual work was carried out). The unexpected result of this ruling was that part-time workers were entitled to more and disproportionate holidays than part-time workers who worked the same total number of hours throughout the year. This anomaly is now being considered.
Consultation Paper
The government's consultation paper intends to address this disparity. The government proposes to replace the 52-week reference period (which ignores periods of no work) with a 52-week period that includes weeks in which no work is performed. By including periods of non-activity in the 52-week reference period, it would ensure that holiday pay received by workers is proportionate (and hence fair) to the time they spend working during the year.
The consultation will end on 9th March 2023
The government's proposals to amend the caselaw create further uncertainty about holiday pay calculations. These proposals are likely to take a long time before they are enacted by Parliament as law. It is also uncertain whether the final draft will be as intended or if amendments will be made. Until further updates are issued, employers should continue using the 52-week reference period, ignoring weeks where no work activity was carried out.
This article is intended as a guide, and employers are advised to call our specialist HR Department to discuss individual cases. They can offer initial advice and provide a bespoke, cost-effective consulting service to ensure you are and remain compliant.
