Just when you thought there was absolute clarity about how much annual leave a part year worker could take and what they should be paid for it, the Government have launched a consultation on further changes.
Don’t get me wrong, in my opinion, this is absolutely needed, but it means that there is still a lack of clarity over annual leave for anyone who is permanently employed, but does not work a full year.
Who might these people be?
Anyone who works term time only is a prime example of a part year worker. They could be within a business or within the education system, but their hours are worked around the school year. Alternatively, it could be ‘bank staff’ who are on a zero hours contract and only work as and when needed. Again, this could be within the education sector, such as cover staff, but equally could be in the social care sector such as care homes.
Seasonal workers may be another example of part year employees. They may only work during the school holidays, perhaps with youth clubs or sports clubs, looking after kids who are not at school. They may be employed to work every summer and Christmas holiday for a retail outlet or a leisure facility.
Whatever the reason these employees are not working the full year, they are employed with contracts and entitled to annual leave.
So where is the issue?
Back in July 2022, I wrote a blog reporting on the ruling in the Harper Trust vs Brazel by the Supreme Court. Even at the time, I pointed out that their decision was flawed. I desperately hoped that I had misunderstood the ruling. However, it turned out that I had fully and correctly understood the ruling and the ruling made no sense in Employment Legislation. In my blog referenced above, I demonstrated the flaw using my daughter, Dania as an example. She only worked in the summer and only worked full time. Rather than pro rating her earnings and applying that to her holiday, she was entitled to the full 5.6 weeks of holiday at 35 hours a week as that was what she had worked in the three months she was working.
In effect, by working full time for 3 months, she could accrue more annual leave than a part time colleague who worked the same hours over the full year. I.e. If Dania worked for 13 weeks and worked 7 hours a day for 5 days a week, she will have worked 455 hours (13 x 35) and ‘earnt’ 196 hours of holiday (35 x 5.6).
If a part time employee did 455 hours over 46.4 weeks (52-5.6), they would work approximately 10 hours a week (455/46.4) and therefore they would accrue 56 hours of holiday time (10*5.6).
What are the Government doing about this?
In an attempt to rectify the inconsistency which now exists because of the Supreme Court ruling, the Government launched a consultation on 12th January 2023. They are asking employers, employees, representatives and temporary staff agencies to respond before 9th March 2023.
They are seeking to understand the implications of changing the reference period for part year and irregular hours workers so that holiday entitlement and pay is directly linked to the amount of work carried out. They are also looking at the way in which holiday is accrued and paid for agency workers and whether any changes are required.
What should employers be doing now?
At the moment, we are in ‘limbo land’.
It is safe to assume that changes are coming and that the current method of calculation is fundamentally flawed.
However, employers MUST work with the law as it stands and comply with the current legislation.
The reference period is currently between 52 and 104 weeks and includes any week where work pay was earnt. Employers must go back for up to 104 weeks until they have 52 weeks of data, or as many weeks as are available. The average weekly earnings in the reference period is then calculated each time the employee takes leave, whether it is one day or one week.
As this is soooo complicated, we have developed a toolkit to assist employers with these calculations.
We have already seen some people put in claims for holiday pay based on the difference between the original percentage method and the current method (see our blog from July 2022), but the current changes may mean that employers will be over paying employees and will be entitled to reclaim money from staff.
At the moment, we have no idea what the timescales might be on the conclusion of the consultation. Not only do we not know what the new rules will be, but we don’t know when they will be implemented or whether there will be an transition period.
Until we have clarification, it is business as usual. Keep on using the methodology which we know is flawed, because that is the only way you are legally compliant!!!
