Changes to holiday pay calculations for part-year workers and those with irregular hours
The government has recently published a draft statutory instrument, The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, which contains amendments to the law on holiday pay.
Back to 12.07%
The changes will make it lawful for employers to use a rolled-up holiday pay method of 12.07% for calculating holiday pay for part-year workers and workers with irregular hours. We believe this method is still being used by some schools. This is despite the supreme court decision in the highly publicised case of Harpur Trust v Brazel, where it was ruled that holiday pay for part-year workers should be calculated using the averaging method over a period of 52 weeks, ignoring any weeks that have not been worked.
Original case
By way of background, Ms Brazel in the Harpur Trust v Brazel case was a clarinet and saxophone teacher and employed as a ‘visiting music teacher’. She did not have a set number of working hours and was paid monthly, being classified as a ‘worker’ under a zero-hours contract. As a worker, she was entitled to 5.6 weeks paid annual leave under the Working Time Regulations. Her holiday pay was calculated on a pro-rata basis to that of a full-time employee using a formula of 12.07%. Ms Brazel argued that her holiday pay should have been calculated using her average earnings over a 12-week period.
Court of appeal
The claim progressed to the court of appeal which agreed with the previous judgment of the employment appeal tribunal that Ms Brazel’s holiday pay should be calculated based on a 12-week average of hours worked. The court of appeal held that EU law did not require leave to be reduced pro rata. Further, it was not necessary to apply a pro rata principle to the accrual of leave under the Working Time Regulations.
12 weeks upped to 52 weeks
From 6 April 2020, the holiday pay reference period used for determining a week’s pay when calculating holiday pay for workers with irregular hours increased from 12 weeks to 52 weeks. Following the case, schools were advised to ensure that they were using a 52-week reference period to calculate holiday pay.
Consultation
The calculation created a number of anomalies whereby part-year workers and irregular workers benefitted from a greater holiday entitlement and pay than part-time workers who worked the same hours each year. To address the disparity, the government sought to consult to understand the impact the judgment had on all sectors.
Full circle
It now appears the government has gone full circle and reverted to the simplified rolled-up holiday pay calculation of 12.07% for part-year workers and those who work irregular hours, instead of having to calculate using a 52-week reference period. The changes are likely to come into force on 1 January 2024.
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