In-depth
Consultation on holiday entitlement for casual workers
The UK Government has released a consultation paper in response to the Supreme Court ruling in the case of Harpur Trust v Brazel. This landmark case confirmed the approach for calculating entitlement to leave (and payment for such leave) for casual workers (i.e. those who work only part of the year), with the result that casual workers are better off than their full-time counterparts.
Background
Entitlement to leave
Under the Working Time Regulations 1998 (WTR), workers are entitled to 5.6 weeks’ or 28 days’ leave per year (whichever is less). This is pro-rated for part-time workers, so someone on 50% of full-time hours per week would have their holiday pro-rated to 50% too.
How is payment for this leave calculated?
In general, a week’s leave is paid according to that worker’s usual rate of weekly pay (reg. 16 WTR). Where a worker has irregular hours, this is calculated by taking an average of pay over the past year (excluding from that calculation any weeks with no pay at all) (s. 224 Employment Rights Act 1996, as amended).
The Supreme Court case
Mrs Brazel was a music teacher, working irregular hours and only during term time (i.e. only part of the year). Her employer changed her holiday pay calculation in 2011 to align with the (then) guidance from ACAS. This guidance suggested that employers could calculate holiday by simply multiplying hours worked by 12.07% (i.e. 5.6 weeks’ leave as a proportion of a whole year).
Mrs Brazel argued that this approach was incorrect and did not reflect the words of the relevant legislation. She initially lost before an employment tribunal, but then won at all other appeal stages before her employer finally appealed to the Supreme Court.
Supreme Court decision
The issue
How should holiday entitlement (and holiday pay) be calculated for someone who works part of the year and with variable hours?
Outcome
The Supreme Court agreed with Mrs Brazel that the ACAS approach was incorrect. Rather, a part year worker’s holiday entitlement is 5.6 weeks and should not be pro-rated. Holiday pay should be calculated by taking the average pay over the previous year, excluding non-working weeks. The Supreme Court acknowledged that, although the words of the relevant legislation produced, in effect, a windfall for workers working part of the year, there was no escaping that that’s what the legislation clearly said.
To demonstrate how this decision results in a ‘windfall’ for part year workers, see the table below.
All year worker
Full-time
Works
Holiday days
Holiday pay
Part-time
Works
Holiday days
Holiday pay
Part year worker
Full-time
Works (full-time for half the year)
Holiday days
Holiday pay
Part-time
Works (half the hours of full-time and for half the year)
Holiday days
Holiday pay
Government consultation
In January 2023, the Government released a consultation seeking to address the "disparity" highlighted above "to ensure that holiday pay and entitlement received by worker is proportionate to the time they spend working".
Because Harpur Trust v Brazel is a Supreme Court decision (the highest court in England), only a change in the law can alter the outcome, hence this consultation on legislative changes.
The consultation paper outlines various options for calculating holiday entitlement in order to achieve the aim of proportionality.
The consultation ends on 9 March 2023.
This consultation, announced only six months after the landmark Supreme Court judgment, is a welcome development from the Government to review a case which has resulted in casual / part-year workers being better off than their full-time counterparts. We hope that any legislation proposed following the consultation is similarly fast-tracked.
Jamie Feldman, Partner
Practical takeaways for employers/HR
- Review HR policies and standard contracts to ensure they align with this ruling (pending the consultation outcome).
- Review existing contracts with part year workers and assess whether any pay corrections need to be made.
- Review plans for employing part year workers.
