United Kingdom: New government consultation on holiday pay published

In brief

The UK government has opened a new consultation on how the holiday pay of certain workers with irregular periods of work should be calculated, following a Supreme Court judgment last year.


Contents

Key takeaways

  • The Supreme Court held in Harpur Trust v Brazel that the 12.07% formula commonly used to calculate holiday pay for workers with irregular hours is incorrect and using it would, in some cases, result in an underpayment. In that case, the claimant was employed in a school on a permanent part-year contract. The Supreme Court held she was entitled to receive 5.6 weeks holiday per year, as any other worker, rather than pro-rated, and would therefore receive more annual leave than an employee working the same number of hours spread throughout the year.
  • The government's consultation seeks views on proposals to pro-rata holiday entitlement for part-year and irregular hours workers based on the annual hours they work. It proposes to introduce a 52 week holiday pay reference period for part-year and irregular hours workers to ensure that their holiday pay and entitlement is proportionate to their working time over a 52 week period.  For many workers with irregular hours and part-year workers, this will therefore go back further than 52 weeks.
  • The consultation also proposes a different, fixed, holiday entitlement reference period of 52 weeks, including those weeks without work. Holiday entitlement would be calculated and fixed at the beginning of the leave year, based on hours worked the previous year, rather than on a "rolling" basis as at present.
  • Also included in the consultation is a proposal to simplify the calculation of holiday, legalising the sometimes controversial but nonetheless often used 12.07% calculation, across both working and non-working weeks. The government asks employers replying to the consultation to explain how they currently calculate holiday, and their views on the proposed methods.
  • The consultation closes on 9 March 2023.

 

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