Irregular hours workers - Government wants simplification of holiday pay calculations

The Government has launched a consultation on holiday entitlement and pay for variable hours workers. This is following the Supreme Court’s decision in Harpur Trust v Brazel case, that holiday entitlement for part year workers cannot be prorated and that holiday pay must be calculated using the method set out in s.224 of the Employment Rights Act 1996.

The effect of this is that employers with workers, who work irregular hours, cannot continue to use the 12.07 per cent formula for calculating holiday pay, but instead must use the calendar look back method requiring them to calculate the average weekly pay over the previous 52 weeks, but ignore any weeks in which no remuneration was payable. Whilst making the holiday pay calculation more complicated for employers and administratively burdensome, it also had the impact of putting irregular hours workers in a better position in respect of their holiday pay when compared to full-time and part-time workers.

The Government is seeking views on changing the legislation so that holiday pay calculations will be based on the time spent working, effectively reversing the complications caused by the Harpur Trust  v Brazel case and making life easier for employers calculating holiday pay for casual workers and other part year workers.

If you want to have your say, you have until 9 March 2023 and can access the consultation here: Calculating holiday entitlement for part-year and irregular hours workers: consultation publishing.service.gov.uk

If, following consultation, the Government chooses to introduce its proposed changes, this will need to be legislated for which will need to pass through parliament. Given the complexities the Harpur Trust v Brazel decision has created for many employers and the peculiar position that part-year workers are put in a better position than full-time or part-time workers, it is possible that that any proposed legislation will pass through parliament fairly quickly without much challenge.  

For the time being though, the legal position remains as it is, and employers should consider the risks of not using the prescribed process set out in s.224 Employment Rights Act 1996 as decided by the Supreme Court in Harpur Trust v Brazel when calculating holiday pay for irregular hours workers.   

If you have any queries regarding these issues, please contact Charlie Barnes.