By Paul Kelly, Partner and Head of Employment (https://www.lawblacks.com/)
Paul Kelly, Partner and Head of Employment at Blacks Solicitors shares his insight into what hospitality businesses need to be aware of when it comes to calculating holiday pay for part-time workers and the legislation in place to ensure that holiday entitlement stays in proportion to time worked.
What does the law say?
Almost all people classed as workers, including those in the hospitality industry, are legally entitled to 5.6 weeks’ paid holiday a year (known as statutory leave entitlement or annual leave1).
● Agency workers
● Workers with irregular hours
● Workers on zero-hours contracts
Employees who work a 5-day week must receive at least 28 days’ paid annual leave a year which is the equivalent of 5.6 weeks of holiday.
Part-time workers are entitled to at least 5.6 weeks’ paid holiday, but this will amount to fewer than 28 days. People working irregular hours, which may include shift workers and term-time workers, are entitled to paid time off for every hour they work.
Last year, the Supreme Court (SC) gave its long-anticipated judgment in the case of Harpur Trust v Brazel which was ongoing since 2017. It related to how holiday leave and pay should be calculated for workers who are employed throughout the year but only work for part of the year. The case concerned a teacher (Mrs Brazel) on a permanent zero-hours term-time contract, but impacted a much wider group of workers, including many part time workers, and highlighted the flaws in the current system for working out holiday entitlement and pay.
Mrs Brazel’s employer, The Harpur Trust, calculated her entitlement to annual leave using ‘the Percentage Method’. This involved calculating Ms Brazel’s hours worked at the end of each term, taking 12.07% of that figure and then paying Ms Brazel her hourly rate for that number of hours as holiday pay. Accordingly, this method resulted in Ms Brazel’s holiday entitlement being pro-rated to be proportional to a full-time worker.
The SC upholding the Court of Appeal’s earlier decision agreed that the Percentage Method was not the correct approach. Instead, the employer should have used the approach set out in the Working Time Regulations 1998, which is to calculate the average weekly pay using the relevant reference period -52 weeks, ignoring any weeks in which she did not receive any pay and multiplying that by 5.6.
In light of this decision, hospitality employers will need to review how they currently calculate holiday leave and pay entitlements for part-year staff. Employers will also need to consider whether to proactively approach employees who have received holiday pay calculated using the Percentage Method and reimburse them for any back payments of holiday pay that they would have received had the Calendar Week method been adopted.
What happens next?
The SC’s judgment has caused employers some concern as it means that some part-year workers are now eligible to receive a larger holiday entitlement than part-time workers who work the same number of hours annually.
To ensure workers’ holiday entitlement is reflective of their time worked, the Government has now issued a consultation paper which looks at ways to address the disparity created. The consultation will seek views on introducing legislation to allow employers to pro-rate the holiday entitlement of part-year workers and workers on irregular hours so that their holiday entitlement is proportionate to their total annual worked.
The Government envisages that this will not only ensure that holiday entitlement is calculated consistently for part-year and part-time workers alike, but also give employers a clear and easy-to-follow method to use when calculating entitlements.
Employers should note that the consultation stage for the paper closed on 9 March 2023 and the Government is now analysing the feedback in response. Following this, the Government will then provide a summary of who responded, the views expressed within the responses, and any other comments made. There is currently no set date for when the summary will be released. It is also likely that if new legislation is implemented, it will not be for some time. Employers must therefore continue to give part-year workers 5.6 weeks entitlement where the Brazel judgement applies.
For more information, please visit www.lawblacks.com/business/employment-law/