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Holiday pay consultation - 12.07% chance of a comeback

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United Kingdom

The Department for Business, Energy and Industrial strategy has published a Consultation on calculating holiday entitlement for part-year and irregular hours workers.  This follows on from last year's Supreme Court case of Harpur Trust v Brazel [2022] ICR 1380.

The Consultation invites comments on a proposed change to the current statutory method for calculating holiday pay for workers with no normal working hours, which is set out in the Employment Rights Act 1996 as read with the Working Time Regulations 1998.  Currently, the calculation uses the amount of the worker's average weekly remuneration in the previous 52 weeks, excluding any weeks when no remuneration was received (and going back no further than 104 weeks).  Under the proposal set out in the consultation, the calculation would use the amount of the worker's average weekly remuneration in the previous 52 weeks including any weeks when no remuneration was received (and going back no further than 52 weeks). 

The Consultation document is confusing because it focuses on calculating the amount of time off on holiday rather than on holiday pay.  All workers are entitled to 5.6 weeks holiday each year.  In the Brazel case this was divided into three blocks of 1.87 weeks, to be taken in the periods between school terms.  The issue for the employer (and then for the Supreme Court) was not how much holiday Ms Brazel was entitled to take but how much she should be paid for her 5.6 weeks entitlement.

By contrast, the Consultation focuses on how much holiday part-year and irregular hours workers should get if their 5.6 week entitlement is taken in days or part-days.  This conflates time off and pay in a way which is not easy to follow.  The overall thrust however, seems to be that the Government is contemplating introducing a calculation for holiday pay akin to the 12.07% formula once recommended by ACAS.  Using that method, employers calculate holiday pay for part-year and irregular hours workers as 12.07% of pay for the work performed. 12.07% is the proportion that 5.6 weeks annual holiday bears to the total working year: 5.6 weeks is 12.07% of 46.4 weeks (52 weeks in the year less 5.6 weeks holiday).

The Consultation closes on 9 March 2023.
 

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