The Government has launched a consultation on calculating holiday entitlement for part-year and irregular hours workers.
The proposal is to introduce a holiday entitlement reference period to ensure that holiday entitlement (and pay) is directly proportionate to the time that is spent working. This comes in response to last year’s Supreme Court decision in Harpur Trust v Brazel, in which it was decided that holiday entitlement under the Working Time Regulations 1998 (WTR) for permanent, part-year workers should not be pro-rated so that it is proportionate to that of a full-time worker. As a result, part-year workers are entitled to a larger annual paid holiday entitlement than part-time workers who work the same total number of hours across the year.
It appears the proposal is that the new rules would not apply to all workers, but would be limited to “part-year and irregular-hours workers”, in which case careful definitions would be required, in order to determine which workers are included, to avoid any potential ambiguity.
The Government has estimated that the decision will benefit between 320,000 and 500,000 permanent term-time and zero-hours contract workers, with approximately 37% of these workers working in the education sector. It is important to note that it is likely that many workers within the education sector, and beyond, already have contracts which implement the existing rights under the Working Time Regulations 1998 (WTR), as applied in Harpur Trust v Brazel, and any future amendment of the WTR will not be able to reverse those pre-existing contractual arrangements. Employers who do wish to unravel those contracts with existing employees, will need to take steps to renegotiate, and may face difficulties with any unions.
The consultation is seeking views on introducing legislation which would allow employers to pro-rate holiday entitlement for part-year workers and workers with irregular hours, in order that they receive annual leave in proportion to the total annual hours they work.
It proposes to achieve this by introducing a 52-week holiday entitlement reference period, based on the proportion of time spent working over the previous 52 weeks. This will include weeks in which workers perform no work (effectively an average of the time worked over 52 weeks will be calculated).
Holiday pay for workers with irregular hours is already calculated using a 52-week reference period, although weeks without work are excluded in calculating their average weekly pay.
There is no comment with regards to accrual of holiday for those on maternity leave or other family-related leave. Any proposals for a reference period would need to ensure that weeks of family-related leave, during which no work is done, do not result in a loss of holiday entitlement or pay.
The Government wants to ensure that any changes they consider do not have any adverse impact on other parts of the legislation. The consultation process will close on 9 March 2023.