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A few weeks ago, the Supreme Court passed a ruling which affects employers when calculating holiday entitlement for workers who work for part of the year (or some weeks of the year).
The case of Harpur Trust v Brazel found that part-year workers should be entitled to the same paid holiday entitlement as their colleagues working all year round.
The ruling involved the application of the Working Time Regulations, which it provides for workers to be entitled to 5.6 weeks of paid annual leave per year.
Who does this apply to?
Examples of those affected are seasonal workers, term-time only workers and those working under a zero-hour contract.
For the ruling to apply, the worker must have a permanent contract that lasts for the full year, even if the individual only works some weeks or months of that year.
In that scenario, the individual is entitled to receive 5.6 weeks of statutory holiday entitlement.
To be clear, these individuals' holiday entitlement should not be pro-rated to reflect that they do not work for that full year. It has been ruled that they are entitled to receive the same holiday entitlement as those who work all year round.
This has a profound effect and may lead to some calculations which feel disproportionate to employers with these types of workers.
What changes need to be made?
If you have any individuals who are seasonal workers, term-time only workers or who are working under a zero-hour contract, you will need to review how their holiday entitlement is calculated.
If your current methodology is based on the 12.07% calculation that was previously advised by ACAS, then please be advised that this is no longer correct.
To calculate what that individual should be paid whilst on holiday, the employer should take an average of the employee pay over the previous 52 weeks.
As explained by Personnel Today…
“Employers have to work out the employee's weekly pay by averaging their pay over the previous 52 weeks, ignoring any weeks where they are on holiday, not working, or on unpaid leave.
That amount will be their “week’s pay” and if they take a week’s holiday, that’s the amount you must pay them. If they take less than a week’s holiday, you will have to work this out as a percentage of a week and calculate the payment accordingly.”
To reiterate, the Supreme Court has made it clear that employers should no longer use the 12.07% method for calculating holiday entitlement for part-time or part-year workers. They have determined that this method of calculating holiday entitlement does not comply with the Working Time Regulations.
With this in mind, there is a real need for any affected employers to consider how they make necessary changes to avoid similar claims as brought in this case.
If you are currently using the 12.07% method for calculating holiday pay and are unsure of how you should be calculating holiday pay moving forwards, then please contact your designated HR Advisor.
We will also be discussing this with all HR clients at their next HR Audit.
Please be mindful that this ruling does not affect part-time workers. Those who work part time are still entitled to receive 5.6 weeks holiday per year, and the number of days holiday a part-time worker receives is dependent on the number of days they work per week.
For example, for a part-time worker working a 0.5 full-time equivalent week, their entitlement will transpire into a proportion of the equivalent full-time entitlement. Therefore, as they only work half of the week, they will be entitled to receive 14 days of holiday (rather than 28 days as received by full-time workers).
If you have questions as to how this new ruling might impact your employees, then please do not hesitate to contact your designated HR Advisor. We will be able to assist with the review and implementation of a compliant holiday calculation.
Alternatively, you can call 01427 420 403 or email firstname.lastname@example.org