Anomalies & costs of holiday entitlement – a glimmer of hope at last?

We’ve encountered many a holiday headache for businesses over the last few years when it comes to employing permanent staff who work part of the year or other irregular hours. The decision in the Supreme Court case of Harpur Trust v Brazel confirmed last year that part-year workers were effectively entitled to a higher proportion of holiday than their full-time counterparts. The decision appeared illogical on the surface but was a result of the interpretation of the Working Time Regulations 1998 and the Court’s view that weeks where the employee did no work should not be factored into the holiday calculation. This led to an apparent holiday windfall when compared to full time staff.

Unexpectedly, the government has stepped in and is currently consulting over a proposal to make holiday entitlement proportionate to hours worked. The government proposes introducing a 52-week holiday entitlement reference period for part-year workers and workers with irregular hours, based on the proportion of time spent working over the previous 52-week period and, significantly, including weeks in which no work was done.

The proposal sets out a pragmatic suggestion of calculating holiday entitlement in hours at the start of the leave year, as 12.07% of the hours actually worked over the previous 52 weeks, based on the statutory holiday entitlement of 5.6 weeks per year. Such an approach would take us back to the previously understood position of pro-rating part year and zero-hours staff entitlement, with a clear relation between their full-time equivalents and the fractional hours which they work.

For good measure the consultation also seeks views on holiday entitlement for agency workers, acknowledging that a 52-week reference period is impractical given the nature of agency work. The current proposal is that agency workers accrue leave each month at 12.07% of hours worked, with no leave accruing between assignments. Leave can be taken during an assignment, or at the end of shorter assignments, or even paid in lieu.

The consultation lasts until 9 March 2023 and is an opportunity for business to influence the shaping of a key obligation to staff which has such an impact on the bottom line.