Proposed changes to how to calculate holiday entitlement for part-year and irregular hours workers

Following a Supreme Court ruling, the government has consulted on the calculation of holiday entitlement received by workers who work part of the year only (part-year) and/or irregular hours.

Previously, as it was not known in advance how long a zero hours or casual worker would be engaged for as they do not have regular working hours, holiday calculations were calculated on the basis of the number of hours (or days) worked using the accrual rate of 12.07% of the hours worked. However, the outcome of the Harpur v Brazel ruling means that this method must not be used for workers who do not work each week of the year when not taking leave, as using the 12.07% method in this circumstance means that they may receive less than their statutory entitlement.

Legislation provides that holiday pay for variable hours’ workers should be calculated based on average hours worked in the previous 52 weeks’ immediately prior to the booked holiday. If no pay was paid in any week, you would need to count back, so that the rate is based on 52 weeks in which pay was paid.

The new Government proposals are…

• A fixed holiday entitlement reference period, based on the proceeding 52-weeks, including non-working weeks for the purposes of calculating holiday pay.

• Legalising the new 12.07% method which will allow employers to pro-rata their holiday entitlement for part-year workers and irregular workers via the proportion of hours worked within the reference period.

• Holiday entitlement will be calculated at the end of each month for workers within the 1st year of employment, using the total number of hours worked in the previous month.

• Using a flat average method to calculate how much holiday is used in hours, by taking a particular day off.

For now, the 12.07% method is overruled, but we will update with more information once the outcome has been announced following the closure of the consultation on 9th March.

Any questions?

Feel free to contact our Farnell Clarke payroll team at any time and we can answer any questions you may have on the proposed changes and what any new legislation may be.